The government of Dachevenda is planning to state a new system of indirect tax that is levied on several distinct items in order to achieve an economic or social or combined purpose. The indirect tax is characterized by a method of collection of taxation whose burden can be shifted from actual taxpayer to another such as the consumer. In this essay, I'm going to analyzed each of the items that the government of Dachevenda plans to levy additional 10% tax on.Sales tax on the cigarettesThe first type of good that the government prepares to impose additional 10% sales tax is cigarette with a specific social purpose aiming to deter people from smoking. Through the implementation of increas ...view middle of the document...
Consequently, it is more likely to spark social conflict issues. Moreover, the high tax rate on cigarettes will absolutely bring a considerable impact on the reduction of cigarette production but not consumption, which means that it may facilitate the rapid development of smuggled cigarettes industry. In addition, due to the high taxation the consumption pattern of total cigarettes industry will be reconstructed, for instance, the smokers will more likely to consume tobacco leaf and make cigarettes by themselves rather than the packet cigarettes with high price. In conclusion, there are a few modifications and improvements that the government of Dachevenda should take in order to accomplish its social purpose. First of all, if the government is not facing the deficit problem to the extent of it has to implement additional 10% indirect tax on cigarettes to raise government revenue the government should remain the current tax rate on cigarettes because certainly the demand of cigarettes will not reduce too much with the fluctuation of price. Secondly, the government should enforce the strength of conducting propaganda to emphasis smoking is a harmful habit that links to a high risks of occurrence of various diseases in order to persuade people to quit from smoking. Finally, the government can supervise and control the entire cigarettes industry to limit the total production of cigarettes within a certain period of time, which would be very helpful for reducing the cigarettes consumption.Sales tax on the movie ticketsThe other type of item that the government of Dachevenda decided to impose extra sales tax is movie tickets. The purpose of this tax policy is to raise government revenue and committee more money back into the local movie industry. Due to the tax levied on the movie tickets is indirect tax it is undoubted that the cinema will transfer the tax burden to consumers by the way of increasing price of movie tickets. Furthermore, accounting for the data provided by the government the projected price elasticizes of demand for movie tickets is -3.7, which reflects that the increased price of movie tickets can lead to a reduction of consumption because movies is as part of the entertainment activities and it is vulnerable to be substituted by plenty other options. Under this circumstance, most of the consumers will be encouraged to not expand money on enjoying movie. As a result, the profits of total movie industry will be influenced severely, which would discourage entertainment business to produce movies and bring a negative impact to the business that desires to enter the movie industry because of less profit they can acquire possibly. As less number of firms exists within the market, those small-medium businesses will be very vulnerable to be taken over or acquired by dominated one. Eventually, the whole industry will be controlled by several huge companies, which is not accord with the government intention to boost local movie industry....
