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Study Notes

Indirect Taxes (Government Intervention)

AS, A Level, IB
AQA, Edexcel, OCR, IB, Eduqas, WJEC

An indirect tax is imposed on producers (suppliers) by the government. Examples include duties on cigarettes, alcohol and fuel and also VAT. A carbon tax is also an indirect tax. Indirect taxes are a form of government intervention in markets.

Value added tax in the UK

  • The standard rate of VAT is 20%
  • Reduced rate of 5% is applied to domestic fuel and power, women’s sanitary products, children’s car seats, contraceptives
  • Zero-rated VAT on Food, Construction of new dwellings, rail and bus fares, books, newspapers and magazines, Children’s clothing, prescription drugs
  • Exempt from VAT - rent on domestic dwellings, Private education, Health service, Postal services, Burial and cremation, Small traders below the turnover limit for VAT registration

Revision for other types of government intervention:

Evaluating Government Intervention in Markets - revision video

Quizlet revision activity on government intervention in markets

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