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1. Research Methods and Processes
Taxes help in infrastructural development of a nation. Through the fulfilment of tax obligations, the same taxpayers ensure maximum welfare and social security, while taxes paid to the state are part of the financial resources used in this social spending programs of education and public health, safety and welfare, housing, community, culture, art, sports, among others. Taxes are necessary for the government to have capital, which should be invested in public works and more benefits for society. I believe that tax is one of the ways that the public sector funding, which serves to provide those goods and services to the public and the private sector does not provide for various reasons or that you do so at a price very high. Within these public goods and services are for example: infrastructure (roads, highways, ports and airports, trains, dams, diversions), health, safety, public employment services, environment, justice. Furthermore, tax is supposed to have a redistributive function of wealth, i.e. those who have more, pay more, but in practice translates into more pay more state and the most hidden less pay.
Every day we utilize many facilities given to us by our government from the taxes we pay. From roads to running tap water, every facility that is being provided to us is via these tax payments. In UK some of the major government spending is to reduce the inequality structure in the society by bringing welfare benefits like unemployment, provide public goods, important public service for instance education and health, pay debt interests and transport. One of the biggest portions of the tax collected by the government in UK goes to the social security department which takes almost a quarter of all public spending (Murphy, 2011).
As a part of the business world, the importance of taxes cannot be denied. It is due to these taxes that businesses are able to operate effectively. The government spends a big chunk of the taxes paid in order to help the local businesses to develop and strengthen the economy. The taxes that the businesses pay are then used for their own development, for instance when a company exports its products the government ensures that proper means of transportation whether it is via road, water or air, are present at all times. Businessmen travel frequently from one place to another for their work, therefore with the help of the paid taxes government builds airports and other stations for easy travelling. If it was not for the taxes we would not be living in a society with infrastructure and many facilities (Torgler, 2007).
One of the major reasons behind conducting this research is that many people criticize this phenomenon and consider that the government is unable to effectively use the money that is being paid to them in the form of taxes. However, I disagree, as we cannot imagine reaching our houses safely if there were no traffic lights, signs and pedestrians on the roads, we will not be able to reach far off places if there were no airports, we will not able to taste some of the best fruits and vegetables if the government would not import, we will not be able to receive education if the government is unable to build schools. These factors show that paying taxes, whether for an individual or a multinational firm, are extremely important (Harford, 2005).
2. Literature and Sources
To complete a research project it important to have valid and authentic sources to gain maximum information about the topic. There is a wide range of sources of information that could be used for any research topic. For the completion of this research several literature reviews, theories and journals were referred. To create a better understanding of the topic, I conducted a survey that was based on the perception of general people and whether or not if they believe that the government is using the tax money as it suppose to be used.
First, discussing the important literature and theories that are supporting my literature review it is important to mention that different authors and writers have different approaches on the same topic. However, Curtiss (1967) discusses the theory of taxation as it talks about the different forms of taxes and how the government uses them to help the general public. Also article by Pettinger (2011), discusses what the government spends its money on mostly in UK, which provides complete statistics and ratios of the money distribution amongst various sectors and its importance. Also the Lindahl’s and Bowen’s model of taxation helped me understand the different forms of taxation and the open ground tax payers have (Thorsten, 2007). Along with the theory of taxation that discusses the approaches that has been taken by the government for taxation including the benefit theory and the ability theory, these theories discuss that how the recipient of government services pay a proportion for these benefits in the form of taxes and the ability approach which separate the revenue and expenditure of the government separately (Samuelson, N.D).
Secondly, for collecting primary data and first hand information, a survey was conducted through survey monkey where the people were able to answer few questions regarding the importance of tax payment. This survey gave first hand information about what people think regarding taxation and whether or not they are satisfied with the measures taken by the government for public support through taxation. There were a number of different thoughts, ideas and concerns that were raised through the survey.
Both of these sources were fundamental for the completion of my research. It was important to refer to the available literature on the web and books in order to gain detailed information about the taxation system and policies in UK along with the theories that are presented by different economists and their importance. Also, with the help of these sources, I was able to take my research into a certain direction as it helped me answer many questions regarding the topic that I had in mind. Furthermore, after collecting the literature, it was important to understand what the people nowadays think about taxes and their usage by government. For this regard the best possible way was to conduct a survey. The survey allowed the respondents to answer a few simple but informative questions about the topic. The answers given in the survey were then systematically used to calculate and understand the thoughts and minds of the people without any bias.
3. Your Knowledge
As the research project is prepared to target an employer and business, it was extremely important to understand taxes. The determination of the tax structure is one of the first steps to form a business. When starting an activity, you can not overlook the tax structure to be opted for. Not only because of the risk of being at fault with the different control bodies, but also by the significant impact that can be economically and financially. The reason for the existence of taxes is to bear the costs of the state, must provide a secure legal framework and infrastructure for persons (natural or legal) to develop in the best way possible.
One of the key factor that I learned during my research was regarding the principles of opportunity according to which when a person fails to pay all or part of the tax that is required, it incurs a violation or breach of its legal obligation to tax that, depending on the circumstances and severity, may become the crime of tax evasion. This is manifested by way of arrears (arrears), concealment of taxable income, deductions increased abuse, etc. Now, what happens when the taxes are not paid in a timely manner? In addition to financial penalties, administrative or criminal that may entail for the taxpayer, the central budget is affected by a shortfall in revenue to be collected.
According to Octavio Beltran, a member of the MFP Tax Studies, revenue should be timely and captured in the time scheduled; otherwise it could create temporary imbalances in cash and cash shortfalls. In the absence of an obligation of the taxpayer-explanatory term income does not reach the budget with the speed that must to finance projects in the plan of that year, that is, there is no liquidity to meet the payments.
Moreover, I was able to understand the taxation through business. The taxation through business not related “business”, but the majority of taxpayers who are taxed through business, the latter endeavour, as most of the revenue, consumption, income and investment of all those who have do with them, as employees, partners, investors, recipients of dividends and others. I had to focus on very important details to understand why it is critical taxation through business in current tax system, in fact, companies make up the majority of manufacturing base in UK, and that 94.8% of these, are small and medium-sized enterprises.
It is interesting to note between the benefits of an MBA the possibility of establishing a professional network through which we can move forward in this competitive business world. This MBA course was able to teach me things that are not actually taught at business schools, the course has taught me that success rarely comes early therefore losing hope is a failure in itself, prepared me for sudden turns and regardless of the size of the organisation you work at it is important to think big. It has helped me understand every aspect of the business world and how it operates. From legal issues to treating fellow workers, I have been able to develop a much better understanding of businesses and economy through this course as it gave a good picture of face to face business.
I was able to recognize and adopt the hard skills of economics, finance, marketing, management and accounting as well as the soft skills which included leadership, teamwork, ethics and communication techniques in the business environment. As a student of MBA I had to acquire these skills for both, inside and outside of the classroom. These skills helped in conducting my research for which I had to work as a manager of my project, create a timeline and prepare a structure on which the research would be conducted. I used my communication skills that I learned through my course in order to convey my message to people and request them to volunteer as respondents for the survey. Another important use of communication was the questions in the survey themselves. They way those questions were prepared and how they were presented to the general public.
As an MBA student, I learned about legal and ethical considerations of a business. My research was one of the most critical factors between government and businesses i.e. taxation. With the help of my project I was able to understand that how businesses should pay their taxes and how important business tax is for the government. One of the main things that I learned as a student of MBA is that success rarely comes early and this project helped me practice this phenomenon quite a few times. In the beginning people were not responding to my survey however, with patience and continuous work, at the end I was able to gather more than enough filled surveys.
5. Critical Thinking and Your Ideas
The research that I conducted on the use of tax by UK government for the population helped me understand a lot about the importance and payment procedures of the taxes. I referred to several online resources like books, journals, articles and blogs (for people’s perspective) to get a better understanding of the topic and found many interesting theories, researchers and views about this topic. However one of the most interesting finding for me as a MBA student was to know about taxation through business.
I have always been very interested in the business world and want to gather as much information about it as possible. During the preparation of the research I read about the history and various functions of taxes. Before the big tax reform of the 70 did not need grand theories to understand the tax, the IRS assessed elemental manifestations of wealth and demanded a tribute, all events within the reach of the common wealth “legal and economic.” This is what still happens today in most of the areas of intervention of public authorities, such as health, education, environment, land, etc, where they serve only experience and knowledge of the industry and related legislation.
Instead of becoming corporate, taxation became more complicated, because the old soul-based economic assessment must merge with that of the best companies actually with its problems in key asset, companies are in fact highly structured social groups, composed of people with different roles and often in opposition to each other that are mutually dependent.
Firms exist in stiffness and functional separation, conflicts of interest, a classic example of ownership and administrators that make the “business processes” adequately reliable (apparently), but with administrators often with an eye to the human temptation of the “owner” of conceal their wealth in the eyes of the tax authorities, acting on the fictitious costs or concealment of revenues depending on the opportunities of the moment, but which mortise the same effect, to lower your taxable income, or contractual mechanisms in the balance between avoidance and simulation contractual trespassing in the field of abuse of rights. While at the same time they are called to serve excellently as large tax collectors on behalf of the State in relation to the taxes charged to the income of others.
6. Barriers Met
Conducting a research can be very crucial if proper steps are not taken at the right time. Before starting a research project, whether it a small or large scale, it is important for the researcher to plan and time every step that will be taken for the completion of the project. However, a good research is the one which provides correct data and information regardless of all the barriers and problems that are faced during its production.
There were many people hurdles during the way but with patience and with the help of the skills learned during the course, I was able to overcome all barriers. One of the main issues was that of the survey. In the beginning there were not enough respondents to the survey and I only had a very limited number of responses to evaluate. However, by spreading out the word and talking to people one on one about the survey, the number of respondents increased. Also, in the beginning some of the questions were unclear and the general public could not understand them therefore I had to paraphrase them.
Secondly, even though the survey did not ask for any personal information from the respondents however as a researcher it was my duty to ensure that all the information being provided to me by my respondents should be kept confidential and only used for the purpose as mentioned. One of the issues that I found during the gathering of literature for the research was very little availability of the content regarding the topic for reading on the internet and e-libraries. Most of the material was opinion based, where researchers and authors only discussed how the government was not able to perform its duties and was not using the tax money in providing services to the people.
In other words, the literature was biased therefore I had to research constantly and expand my resources in order to gain better literature for the research. During the major project there were no such large scales issues. The research was conducted in a systematic manner and the results were analysed very carefully to understand the thoughts of public.
7. Professional Development
Currently, public and private enterprises is the engine of economic development of any country in the world. It is therefore necessary to have professionals able to make decisions that generate economic and social value in a company or organization. During my research I was able to gather more knowledge about the business and tax world and how taxation effects the business management. This information can help me work in all areas of a company for example: operations, treasury, budgeting, purchasing, human resources, accounting, marketing, finance, and business, among others.
I was able to undertake decisions while administering my research. After the completion of my research I am able to plan, organize, direct and control a part or all of a business or organization, effective use of human and financial resources. When I plan I mean setting targets or goals. By organizing I am referring to the allocation of activities and functions. By direct I mean ensuring that all employees do their work as a team leader. And finally, by control I mean planned verify that everything is being carried out in the right way, and if not it will be required to correct the errors.
As mentioned earlier, I learned about how the government uses the tax payments for building proper infrastructure and providing facilities to the public. Management is instrumental in the organizing, forecasting, control, order and planning of resources, both material (equipment, machinery, etc.), and financial, due to its character and influence social development in an organisation. As I want to pursue the field of business in future, the research helped me develop some important skill of recovering from the decline and creating alternative solutions to a problem. The project gave me the ability to solve new problems, of various kinds and any circumstances. The most basic skill I was able to learn during the research was that of leadership. Every organization requires clear objectives and a leader to guide them towards them. Entrepreneurs must become great leaders to identify people that make up your team and help them walk together toward common goals. As well as I learned how to focus and have a vision for tasks, persistence and patience and flexibility as Successful entrepreneurs understand that the world and the environment in which they move is constantly changing. They must adapt their strategies and offerings while not losing sight of the ultimate goal.
Curtiss, W.M. (1967), Taxation Theory, Freeman: Ideas on Liberty, Vol. 17(11), pp. 674-678
Giersch, T. (2007), From Lindahl’s Garden to Global Warming: How Useful is the Lindahl Approach in the Context of Global Public Goods?, 63rd Congress of the IIPF: Warwick.
Harford, T. (2005). The Undercover Economist:Exposing Why the Rich Are Rich, the Poor Are Poor–and Why You Can Never Buy a Decent Used Car!: Exposing Why the Rich Are Rich, the Poor Are Poor–and Why You Can Never Buy a Decent Used Car! Oxford: Oxford University Press.
Murphy, R. (2011, November 26). Three important reasons why tax evasion matters in the UK. Retrieved September 6, 2012, from Liberal Conspiracy: http://liberalconspiracy.org/2011/11/26/three-important-reasons-why-tax-evasion-matters-in-the-uk/
Pettinger , T. (2011), What does the Government Spend its Money on? , Economics.Help, http://www.economicshelp.org/blog/142/economics/what-does-the-government-spend-its-money-on/ [Accessed on 6 September, 2012]
Torgler, B. (2007). Tax Compliance and Tax Morale: A Theoretical and Empirical Analysis. Camberley: Edward Elgar Publishing.
Samuelson, P.A. (N.D) Diagrammatic Exposition of a Theory of Public Extpenditure, University of California, Santa Barbara.