TAXATION Essay Example | Topics and Well Written Essays - 2000 words - 1

TAXATION - Essay Example Furthermore, the nature in which we tax savings can be used to explain the difference between individual taxation and corporate taxation and this is because the behavior differences between these forms of entities can clearly be stated. Still, savings realized due to taxation has an influence overall amounts of savings in the economy; in addition, how these savings are spread helps in explaining wealth distribution. This is because the amount of investments depends on the amounts of savings and by extent it is through investments that we are able to create wealth. Lastly, the manner in which taxation is done will determine an individual’s decisions on the amounts to save and the extent to which they are able to take risks while spreading their savings on assets (Angelopoulos & Malley 2010). Looking at taxation on savings in UK currently, we will take the approach of reviewing the taxation of; income tax, the NICs, and the capital gains tax. There is a complexity and unfairness on taxation of these forms of incomes; for instance, owner occupied housing, cash and shares held in ISAs savings are out of the taxation bracket. Therefore such forms of incomes are not taxed on returns as well as withdrawal. This form of treatment is not applicable in case of ISAs making the TEE treatment only available for investments in equity as opposed to savings in cash. The current system also provides a very in the taxation of pensions, here, savings is within the incomes that is subject to taxation. In addition, fund income is as well not subjected to taxation though withdrawals are taxed (Ainslie 2005). This is called the EET regime and it favors pensions since the taxation of pensions under it would consistently yield a zero as a normal return to savings. The pension saving is also su bsidized since 25% of the fund can be withdrawn without being taxed if the withdrawal is in lump sum. The pension contributions by the employers are also subsidized and tax favored, as they are