Unit 38 Business and the Economic environment
Fiscal and monetary factors
P4 explain how both fiscal and monetary policy decisions have affected a selected business
Introduction
In this part of my assignment I will be explaining the use of fiscal and monetary policy and how these
policies affect the organisation. The organisation I have chosen to refer to in this part of my
assignment is Tesco
Fiscal policy
Fiscal policy is a policy which is used by the government to spend and invest on a vast variety of
sectors. In the public sector areas such as Education, Health, Defence, Welfare and Transport. Fiscal
policy is seen as a means to increase aggregate demand within the economy which is often
supported by many economists who support the use of fiscal policy as the means to fund public
sector organisations.
Income Tax
Income Tax is a form of direct tax that is paid based upon an individual or businesses income. Taxing
individuals is set on the principle that the lowest earners within society are taxed 20% of income
whilst the top earners are taxed 40% of income. It is however worth noting that many individuals
may be subject and exempt from paying this form of tax is their level of income is below a certain
figure, currently this figure is believed to be around £10,500. Tax also come through the interest
upon an individual’s savings within a saving account once again the figure percent taken is
dependent upon the individual’s earnings and thus the lowest earners pay 20% of interest in tax
whilst the highest earners pay 40% of interest in tax.
For Tesco employees they will not receive the full amount of salary due to income tax when they
receive their payment, this means that they will not have enough disposable income in order to do
shopping at Tesco and not enough purchases will be made by customers. This means that not
enough sales are being made by Tesco.
Corporation tax
Corporation tax is a form of tax that directly placed upon organisations profits. Many large
organisations avoid paying corporation tax by investing back into the company for the future in
order to gather exemptions from the government. The current level of corporation tax is 20% of
profits.
When corporation tax reduces then Tesco as a business will have more money and they can reinvest
capital into their facilities improving e.g. their self-checkout or they can open up new branches
nationwide.
Value added tax
Value added tax is a form of tax that is charged upon most goods and services. These taxes also
apply to many goods that are brought into the United Kingdom from outside the European Union.
Value added tax is currently applicable to many goods and services ranging from materials to the
sales of services. The current level of VAT that is payable by most organisations is set at 20%.
Fiscal and monetary factors
P4 explain how both fiscal and monetary policy decisions have affected a selected business
Introduction
In this part of my assignment I will be explaining the use of fiscal and monetary policy and how these
policies affect the organisation. The organisation I have chosen to refer to in this part of my
assignment is Tesco
Fiscal policy
Fiscal policy is a policy which is used by the government to spend and invest on a vast variety of
sectors. In the public sector areas such as Education, Health, Defence, Welfare and Transport. Fiscal
policy is seen as a means to increase aggregate demand within the economy which is often
supported by many economists who support the use of fiscal policy as the means to fund public
sector organisations.
Income Tax
Income Tax is a form of direct tax that is paid based upon an individual or businesses income. Taxing
individuals is set on the principle that the lowest earners within society are taxed 20% of income
whilst the top earners are taxed 40% of income. It is however worth noting that many individuals
may be subject and exempt from paying this form of tax is their level of income is below a certain
figure, currently this figure is believed to be around £10,500. Tax also come through the interest
upon an individual’s savings within a saving account once again the figure percent taken is
dependent upon the individual’s earnings and thus the lowest earners pay 20% of interest in tax
whilst the highest earners pay 40% of interest in tax.
For Tesco employees they will not receive the full amount of salary due to income tax when they
receive their payment, this means that they will not have enough disposable income in order to do
shopping at Tesco and not enough purchases will be made by customers. This means that not
enough sales are being made by Tesco.
Corporation tax
Corporation tax is a form of tax that directly placed upon organisations profits. Many large
organisations avoid paying corporation tax by investing back into the company for the future in
order to gather exemptions from the government. The current level of corporation tax is 20% of
profits.
When corporation tax reduces then Tesco as a business will have more money and they can reinvest
capital into their facilities improving e.g. their self-checkout or they can open up new branches
nationwide.
Value added tax
Value added tax is a form of tax that is charged upon most goods and services. These taxes also
apply to many goods that are brought into the United Kingdom from outside the European Union.
Value added tax is currently applicable to many goods and services ranging from materials to the
sales of services. The current level of VAT that is payable by most organisations is set at 20%.
