Taxation Essay Example | Topics and Well Written Essays - 2750 words

Taxation - Essay Example First, the paper explores the evidence presented by Mirrlees that is applicable to welfare reform, then analyses the shortcomings of the current benefits and welfare system, the changes proposed to the welfare system, and lastly, criticisms launched by various parties to the proposed changes to the UK benefits and welfare system. The Mirrlees Review delivers a comprehensive review of tax reform drawing on new evidence, new (applied) theory, and new economic environment. The main motivation for the call for reform was a tax structure that does not work as a system (absence of joining up between welfare benefits, corporate taxes, and personal taxes); is not neutral in cases where it should be (irreconcilable savings taxes and a corporate tax system that elevates debt over equity); is not well structured where it should diverge from neutrality, and fails to attain progressivity efficiently (Auerbach 2012, p.685). The impact of taxation on work effort forms one of the core sources of inefficiency of a distortionary tax system. Labour supply models convey the trade off between work and leisure. The evidence detailed in Labour Supply and Taxes detail that the hours of are comparatively inelastic for men, and a bit responsive for married women (Meghir and Philips 2008, p.3). The participation of low education men is more responsive to the incentive to incentives than initially thought. For men with enhanced levels of education, participation is virtually responsive. The Mirrlees Review considered evidence under five headings: critical margins of adjustment to tax reform; measurement of effective tax rates; the significance of information and complexity; evidence on the size of responses; and, implications from theory for tax design (Mirrlees, et al. 2010, p.2). The review delivers empirical evidence on labour supply responses for individuals and families at both the intensive and extensive margins and by age and demographic structure;