Question

What might be 2 ways in which to simplify the tax system?  What are at least 3 key factors that control the cost of production? Please answer and give a detailed explanation.

Answer 1

There are different ways to simplify the tax system. The first way is to implement only one tax for all the goods & services purchased so that there will be no doubling of taxes, taxes upon taxes or overlapping of taxes when a good or service is traded. Here, under the single tax system, slabs of rate can be set for different type of products and services. Luxury products can have higher tax, but necessary goods will have minimal tax. For example, it is a goods & services tax (GST) being implied in India that is one tax. The second way is to simplify the income tax system by applying proportional taxation system where two slabs can be applied. For income below $10000, one proportional tax rate should be applied and for income above $10000, another proportional tax should be applied. It will help people as well as authorities to easily calculate the tax to be paid or received from one person.

There are different factors controlling the cost of production. Three factors are as follows.

1 Wage rate of the employees or workers who act as a factor of production. Increasing the wage rate, will increase the cost of production & vice versa.

2. Cost of raw materials that can escalate or reduce the cost of production

3. Productivity of the employees that affects the efficiency and cost of production is affected.