Economic influences - Taxation 2.5.1
Taxation - Charges on individuals and organisations by governments. Direct Taxation - This includes income tax, National insurance and corporation tax - direct taxes are charged on earnings. Indirect Taxation - This includes VAT, excise duties (e.g. on petrol and alcohol), car tax, insurance tax and others. In 2015, the government raised a total of £647 billion from taxation. 94% came from central sources such as income tax, corporation tax and indirect taxes , just 6% came from local taxation (council tax) Direct taxation is levied on earnings and will affect the level of a consumers' disposable income. For example, an increase in income tax will reduce sales of many products and services, with some expectations. Indirect taxation such as VAT will have a similar effect; an increase in the rate of VAT will increase prices (although food eaten at home and a few other products such as housing, books and children's clothes carry no VAT). This will reduce consum...