Unit 38 M2 and D2

1551 Words May 25th, 2015 7 Pages
Fiscal Policy: Fact sheet
The Fiscal policy report to David Lewis, Tesco’s CEO.
Definition
The fiscal policy is when the government changes its spending level and tax rates to monitor and influence their economy. The government will need to increase tax revenues to fund expenditure by increasing taxation by adjusting the income tax level.
Role of Fiscal policy
The role of the fiscal policy is to monitor the economy and shows the effects of adjusting income tax. The fiscal policy also can redistribute income by progressive tax which is the percentage of tax which is charged due to a person income. This allows mare tax on people with higher incomes to increase tax revenues. The fiscal policy shows that a rise in income tax would
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Personal allowance
This is the salary a person can earn before being taxed which is £10,000.
Deficit financing
Deficit financing is the amount of government spending compared to tax revenues. If the government spends more money than it generates then the government is in a public sector deficit and the country is in debt. This means that the government will decrease spending on public services and increase taxes to try to repay their debt.
Budget process
The government has the Autumn Statement in October where the government announces its spending plans and the Budget in March which states any tax changes. The budget provides private businesses tax changes which will directly affect them. The autumn statement will indicate the amount of money being spent which could affect the changes in the budget in March.
Fiscal policy impact on Tesco
The fiscal policy affects Tesco due to an increase in income tax which will cause the all customers to do less spending and have their spending habits change. This will affects Tesco’s profits, stock and cause them to lose stores and job losses which will create bad morale. Tesco’s market share might decrease depending on the effects on the competitors. Also Tesco will do less investment due to less profit to be able to spend. An increase in VAT will affect Tesco they will gain less profits for the same amount of sales. Tesco will either have to increase their…

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