Supplemenatry lecture notes taxeffect

Limitation of Fiscal Policy: The desired extent of the change in macroeconomic indicator in order to solve a macroeconomic problem could not be achieved.

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Instead of helping the recovery process, automatic stabilisers can instead slow down the recovery and act as a drag on the expansion. As Singapore government does not provide unemployment benefits, we do not suffer from the above problem as much as other countries such as the U. To attract more foreign investments, Singapore has to keep its Corporate and Personal Income Taxes competitive. Recession Expansionary fiscal policy G and tax which C and I because of Recognition lag, Implementation lag or Response lag please explain the lags in yr answers AD does not increase immediately, it more than necessary desired might increase after the economy recovers by itself increase in AD desired increase in AD may not achieved increase in NY may not achieved more than necessary increase NY will increase DD pull inflation. A fiscal drag can occur if the economy moves from a deep recession and begins to recover. The accuracy of forecasting Inaccurate forecasts can affect the governments decision to act swiftly to address a problem of excess or deficient demand. Fiscal drag Fiscal drag is defined as the tendency of automatic fiscal stabilisers to reduce the recovery of an economy from recession. For example, the government can increase its expenditure on infrastructure spending on roads and hospitals , merit goods education and healthcare , public goods national defence or give tax incentives for investment. All these government spending would increase the amount of capital goods and hence increase the productivity capacity of the economy.

Suppose that the government has adopted an expansionary fiscal policy to help the economy to recover from recession by lowering taxes. The rationale of this was to raise government revenue while keeping direct taxes competitive.

This Constitutional framework protects past reserves by enforcing financial prudence, while allowing the Government to draw on them in times of need. Ideally, with no time lags, the government should intervene by contractionary policies at Stage 2 and expansionary at Stage 4.

This will enhance business competitiveness.

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However, the government can use discretionary fiscal policy to contract the economy and cause the income to change direction fall. Other limitations of tax cuts to boost national income: If tax cuts are temporary, consumers may not increase spending. Corporate and Personal income taxes have been reduced worldwide. Recession Expansionary fiscal policy G and tax which C and I because of Recognition lag, Implementation lag or Response lag please explain the lags in yr answers AD does not increase immediately, it more than necessary desired might increase after the economy recovers by itself increase in AD desired increase in AD may not achieved increase in NY may not achieved more than necessary increase NY will increase DD pull inflation. Lower tax revenue from these sources will have to be replaced by other sources. This Constitutional framework protects past reserves by enforcing financial prudence, while allowing the Government to draw on them in times of need. With such prudent fiscal policy, Singapore enjoyed consistent budget surpluses that contributed to its high savings rate that allowed it to achieve one of the highest investment rates in the world.

With such prudent fiscal policy, Singapore enjoyed consistent budget surpluses that contributed to its high savings rate that allowed it to achieve one of the highest investment rates in the world. Taxation However, a fall in T results in a smaller multiplier effect compared to the same increase in G, because of the withdrawal effect of mps.

Fiscal drag Fiscal drag is defined as the tendency of automatic fiscal stabilisers to reduce the recovery of an economy from recession. With a given level of government spending, its multiplied increase in national income will be lower as compared to other less open economies.

The Singapore Government has adopted the following principles to meet its objectives3: 1.

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With such prudent fiscal policy, Singapore enjoyed consistent budget surpluses that contributed to its high savings rate that allowed it to achieve one of the highest investment rates in the world. Tax and expenditure policies should be justified on microeconomic grounds and focus on supply-side issues; 3. Singapore introduced the largest countercyclical Budget since Independence to help us see through the downturn. However, expenses on telephones including a mobile phone incurred by the employer on behalf of employee shall not be treated as taxable perquisite. However, exemption is not applicable to so much of the loan as has been reimbursed to the employee under any medical insurance scheme. Taxation However, a fall in T results in a smaller multiplier effect compared to the same increase in G, because of the withdrawal effect of mps. Personal Income Taxes has also been lowered. Lower tax revenue from these sources will have to be replaced by other sources. Fiscal drag Fiscal drag is defined as the tendency of automatic fiscal stabilisers to reduce the recovery of an economy from recession. With a given level of government spending, its multiplied increase in national income will be lower as compared to other less open economies. Corporate and Personal income taxes have been reduced worldwide. The rationale of this was to raise government revenue while keeping direct taxes competitive.

Instead of helping the recovery process, automatic stabilisers can instead slow down the recovery and act as a drag on the expansion. For example, if the government inaccurately predicts the magnitude of an economic slowdown next year and over-exercises expansionary fiscal policy to boost the economy, it may cause the economy to expand more rapidly and risk experiencing inflationary problems!

Corporate and Personal income taxes have been reduced worldwide. Singapore introduced the largest countercyclical Budget since Independence to help us see through the downturn.

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