Get Ready for the Postgraduate Entrance English Exam. Working with Texts. Часть 1. Учебное пособие

nomic theorists consider the concept to be intellectually dishonest since in reality money is fungible. Furthermore, it often happens that taxes or excises initially levied to fund some specific government programs are then later diverted to the government general fund. In some cases, such taxes are collected in fundamentally inefficient ways, for example highway tolls.

"Flat", "Progressive", and "Regressive" taxation

An important feature of tax systems is whether they are flat tax (the tax as a percentage of income is constant over all income levels), progressive tax (the tax as a percentage of income rises as income rises), or regressive tax (the tax as a percentage of income falls as income rises). Progressive taxes reduce the tax incidence of people with smaller incomes, as they shift the incidence disproportionately to those with higher incomes.

Direct and indirect taxation

Taxes are sometimes referred to as direct tax or indirect tax. The meaning of these terms can vary in different contexts, which can sometimes lead to confusion. In economics, direct taxes refer to those taxes that are collected from the people or organizations on whom they are ostensibly imposed. For example, income taxes are collected from the person who earns the income. By contrast, indirect taxes are collected from someone other than the person ostensibly responsible for paying the taxes.

Types of taxes

Income tax

Income tax is commonly a progressive tax because the tax rate increases with increasing income. Income tax may be collected from legal entities (e.g., companies) as well as natural persons (individuals), although, in some cases, the income tax on legal entities is levied on a slightly different basis than the income tax on individuals and may be called, in the case of income tax on companies, a corporation tax or a corporate income tax.

Emergency tax

In the UK, emergency tax is a special tax code used by employers when the tax code of an employee is unknown. A person with this code may pay excessive tax until their true tax code is issued by the Inland Revenue. If excessive tax is paid, this will be refunded to the person by the Inland Revenue.

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Retirement tax

Some countries with social security systems, which provide income to retired workers, fund those systems with specific dedicated taxes. These often differ from comprehensive income taxes in that they are levied only on specific sources of income, generally wages and salary (in which case they are called payroll taxes). A further difference is that the total amount of the taxes paid by or on behalf of a worker is typically considered in the calculation of the retirement benefits to which that worker is entitled. These taxes are sometimes regressive in their immediate effect.

Capital gains tax

A capital gain tax is the tax levied of the profit realized upon the sale of an asset. In many cases, the amount of a capital gain is treated as income and subject to the marginal rate of income tax.

Corporation tax

Corporation tax is a tax on corporate earnings (and often includes capital gains) of a company. Earnings are generally considered gross revenue less expenses. However, corporate expenses that relate to capital expenditures are rarely deducted in full (such as the entire cost of a company truck) and are often deducted over the useful life of the asset purchase. Generally, industrialized countries also use a regressive rate of tax upon corporate income.

Poll tax

A poll tax, also called a capitation tax, is a tax that levies a set amount per individual. The earliest tax mentioned in the Bible of a halfshekel per annum from each adult Jew (Ex. 30:11-16) was a form of poll tax. Poll taxes are administratively cheap because they are easy to compute and collect and difficult to cheat. However, they are very unpopular because they are strongly regressive (poorer people pay a higher proportion of their income than richer people).

Excises

An excise is not a function of the value the product being taxed. Excise taxes are based on the quantity, not the value, of product purchased. For example, in the United States, the Federal government imposes an excise tax of 18.4 cents per US gallon of gasoline, while state governments levy an additional 8 to 28 cents per US gallon.

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Sales tax

Sales taxes are a form of excise levied when a commodity is sold to its final consumer. They are generally held to discourage retail sales. The question of whether they are generally progressive or regressive is a subject of much current debate. People with higher incomes spend a lower proportion of them, so a flat-rate sales tax will tend to be regressive. It is therefore common to exempt food, utilities and other necessities from sales taxes, since poor people spend a higher proportion of their incomes on these commodities, so such exemptions would make the tax more progressive.

Tariffs

An import or export tariff (also called customs duty or impost) is a charge for the movement of goods through a political border. Tariffs discourage trade, and they may be used by governments to protect domestic industries. A proportion of tariff revenues is often hypothecated to pay government to maintain a navy or border police. The classic way of cheating a tariff is smuggling.

Value added tax

A value added tax (sometimes called a goods and services tax – GST, as in Australia and Canada) applies the equivalent of a sales tax to every operation that creates value.

VAT was historically used when a sales tax or excise tax was uncollectible. For example, a 30% sales tax is so often cheated that most of the retail economy will go off the books. By collecting the tax at each production level, and requiring the previous production level to collect the next level tax in order to recover the VAT previously paid by that production level, the theory is that the entire economy helps in the enforcement. In reality, forged invoices and the like demonstrate that tax evaders will always attempt to cheat the system.

Property taxes

A property tax is usually levied on the value of property owned, usually real estate. Property taxes may be charged on a recurrent basis, or upon a certain event.

A common type of property tax is an annual charge on the ownership of real estate, where the tax base is the supposed value of the property.

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The two most common types of event driven property taxes are stamp duty, charged upon change of ownership, and inheritance tax, which is imposed in many countries on the estates of the deceased.

In contrast with a tax on real estate, a land value tax is levied only on the unimproved value of the land ("land" in this instance meaning the economic term, i.e., all natural resources). Land tax has long been recognized as the only tax which does not distort market relations.

Transfer taxes

Historically, in many countries, a contract needed to have a stamp affixed to make it valid. The charge for the stamp was either a fixed amount or a percentage of the value of the transaction. In most countries the stamp has been abolished but stamp duty remains. Stamp duty is levied in the UK on the purchase of shares and securities, the issue of bearer instruments, and certain partnership transactions. Its modern derivatives, stamp duty reserve tax and stamp duty land tax, are respectively charged on transactions involving securities and land. Stamp duty has the effect of discouraging speculative purchases of assets by decreasing liquidity. Taxes on currency transactions are known as Tobin taxes.

Inheritance tax

Some believe that inheritance taxes do not have any harmful effect on the economy and may even be beneficial as they encourage consumer spending by the elderly. However, they are also believed to discourage productivity and to disrupt the continuity of family-owned businesses.

Wealth (net worth) tax

Some countries' governments will require declaration of the tax payers' balance sheet (assets and liabilities), and from that exact a tax on net worth (assets minus liabilities), as a percentage of the net worth, or a percentage of the net worth exceeding a certain level. The tax is in place for both "natural" and in some cases legal "persons".

Personal property tax

In many jurisdictions (including many American states), there is a general tax levied periodically on residents who own personal property within the jurisdiction. Vehicle and boat registration fees are subsets of this kind of tax.

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II. Vocabulary Items

annual a – годовой

charge n – плата, денежный сбор cheat v – мошенничать, обманывать corporation tax – налог на корпорацию deceased n – офиц. умерший

direct tax – прямой налог earnings n – доход, прибыль emergency tax – резервный налог

enforcement n – приведение в исполнение, принудительное взыскание (платежей)

evader n – уклоняющийся (от уплаты) excise n – акциз, акцизный сбор expenditures n – расходы

expenses n – расходы, издержки

final consumer – конечный потребитель

fiscal policy – фискальная политика, бюджетно-налоговая политика

flat a – твердый, фиксированный forged a – поддельный

gains n – доходы

gross revenue – валовой доход hypothecation n – передача в залог, заклад income tax – подоходный налог

indirect tax – косвенный налог individual n – физическое лицо inheritance tax – налог на наследство

Inland Revenue – внутренние бюджетные поступления legal entity – лицо с законным статусом для вступления в сделку

legal tender – законное средство платежа levy n – сбор, взимание (налогов) marginal a – предельный, минимальный

net worth – чистая стоимость компании, собственный капитал poll tax – подушный налог

profit n – прибыль, доход

progressive a – прогрессивный (о налоге)

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property n – собственность, имущество public order – общественный порядок

real estate – недвижимое имущество, недвижимость regressive a – регрессивный (о налоге)

retail a – розничный

retired a – ушедший на пенсию

retirement benefits – пенсия (по выходе в отставку) salary n – оклад, заработная плата служащего sales tax – налог с продаж

smuggling n – контрабанда

stamp duty – гербовый сбор по ценным бумагам tariff n – тариф

tax n – налог, сбор, пошлина taxation n – налогообложение tax burden – налоговое бремя

transfer tax – налог на передачу акций и облигаций корпорации (США)

unemployment benefit – пособие по безработице value added tax – налог на добавленную стоимость wages n – заработная плата (рабочих)

welfare n – социальное обеспечение

III. Exercises

1.Read the text.

2.Learn the vocabulary items by heart.

3.Translate the text in written form.

4.Retell the text using the following expressions and terms: legal entity, direct tax, indirect tax, military defense, enforcement of law and public order, protection of property, redistribution of wealth, economic infrastructure, the operation of government, welfare and public services, cash taxes, tax rate, tax burden, fiscal policy, flat tax, progressive tax, regressive tax, direct tax, indirect tax, income tax, retirement tax, on behalf of, the retirement benefits, capital gains tax, corporation tax, gross revenue, poll tax, excises, sales tax, tariffs, domestic industries, value added tax, tax evaders, property taxes, annual charge, transfer taxes, inheritance tax, wealth tax, personal property tax.

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IV. Test III (4)

1. Read the text again and decide which statements are true.

1.Customs duty or impost is a charge for the movement of goods through a political border.

2.In economics, indirect taxes refer to those taxes that are collected from the people or organizations on whom they are ostensibly imposed.

3.Poll tax has long been recognized as the only tax which does not distort market relations.

4.Progressive taxes reduce the tax incidence of people with smaller incomes, as they shift the incidence disproportionately to those with higher incomes.

2. Match the words given in the left column with the words in the

Unit 5

I. Information for study

Insurance

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of potential financial loss. Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a reasonable fee and duty of care.

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Principles of insurance

The timing or occurrence of the loss must be uncertain.

The rate of losses must be relatively predictable. In order to set premiums (prices) insurers must be able to estimate them accurately. If the coverage is unique, the insured will pay a correspondingly higher premium. Lloyd's of London often accepts unique coverages (e.g., the insuring of Tina Turner's legs).

The losses must be predictable on a macro level. Insurers need to know how much they would be required to pay when the insured-for event occurs. Most types of insurance have maximum levels of payouts, but not all do, notably health insurance.

The loss must be significant. The legal principle of De minimis dictates that trivial matters are not covered. Furthermore, rational insurance uses existing insurance when the transaction costs dictate that filing a claim is not rational.

The loss must not be catastrophic: if the insurer is insolvent, it will be unable to pay the insured. In the United States, there exists a littleknown system of Guaranty Funds to reimburse insured people whose insurance companies have become insolvent. This program is run by the National Association of Insurance Commissioners (NAIC).

Indemnification

An entity seeking to transfer risk (an individual, corporation, or association of any type) becomes the ‘insured’ party once risk is assumed by an ‘insurer’, the insuring party, by means of a contract, defined as an insurance ‘policy’. This legal contract sets out terms and conditions specifying the amount of coverage (compensation) to be rendered to the insured, by the insurer upon assumption of risk, in the event of a loss, and all the specific perils covered against (indemnified), for the term of the contract.

When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a ‘claim’ against the insurer for the amount of loss as specified by the policy contract. The fee paid by the insured to the insurer for assuming the risk is called the ‘premium’. Insurance premiums from many clients are used to fund accounts set aside for later payment of claims – in theory for a relatively few claimants – and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses, the remaining margin becomes their profit.

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Determination of rate structures

The insurer uses actuarial science to quantify the risk they are willing to assume. Data is generated to approximate future claims, ordinarily with reasonable accuracy. Actuarial science uses statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are used by insurers, in conjunction with additional factors, to determine rate structures.

For example, many individuals purchase homeowner’s insurance policies by signing a contract paying a premium to an insurance company. If a covered loss occurs, the insurer is obliged by the terms of the contract to honor the insured’s claim. For some policyholders, the amount of insurance benefits received from their insurer will greatly exceed the expense of premiums paid. Others may never make a claim or receive any benefit other than the peace of mind rendered by the security of an insurance policy. When averaged, the total claims expense paid by an insurer should be less than the total premiums paid by their policyholders, with the difference allocated to overhead and profit.

Insurance companies also earn investment profits. These are generated by investing premiums received until they are needed to pay claims. This money is called the ‘float’. The insurer may make profits or losses from the value change in the float as well as interest or dividends on the float. In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, at the result of float. Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well.

Types of insurance

Any risk that can be quantified probably has a type of insurance to protect it. Among the different types of insurance are:

• Automobile insurance, also known as auto insurance, car insurance and in the UK as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the vehicle itself. Over most of the United States purchasing an auto insurance policy is required to legally operate a motor vehicle on public roads. Recommendations for which policy limits should be used are specified in a number of books.

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•Casualty insurance insures against accidents, not necessarily tied to any specific property.

•Credit insurance pays some or all of a loan back when certain things happen to the borrower such as unemployment, disability, or death.

•Financial loss insurance protects individuals and companies against various financial risks. For example, a business might purchase cover to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time. Insurance might also cover failure of a creditor to pay money it owes to the insured. Fidelity bonds and surety bonds are included in this category.

•Health insurance covers medical bills incurred because of sickness or accidents.

•Liability insurance covers legal claims against the insured. For example, a homeowner’s insurance policy provides the insured with protection in the event of a claim brought by someone who slips and falls on the property, and brings a lawsuit for her injuries. Similarly, a doctor may purchase liability insurance to cover any legal claims against him if his negligence (carelessness) in treating a patient caused the patient injury and/or monetary harm. The protection offered by a liability insurance policy is two-fold: a legal defense in the event of a lawsuit commenced against the policyholder, plus indemnification (payment on behalf of the insured) with respect to a settlement or court verdict.

•Life insurance provides a cash benefit to a decedent’s family or other designated beneficiary, and may specifically provide for burial and other final expenses.

•Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.

•Locked Funds Insurance is a little known hybrid insurance policy jointly issued by governments and banks. It is used to protect public funds from tamper by unauthorized parties. In special cases, a government may authorize its use in protecting semi-private funds which are liable to tamper. Terms of this type of insurance are usually very strict. As such it is only used in extreme cases where maximum security of funds is required.

•Marine insurance covers the loss or damage of goods at sea. Marine insurance typically compensates the owner of merchandise for

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