Online Lessons

Indirect Taxes Introduction (Online Lesson)

  • Levels: AS, A Level, IB
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

This online lesson introduces students to the use of indirect taxes as a way of tackling market failure.

WHAT YOU'LL STUDY IN THIS ONLINE LESSON

  • The reasons for, and nature of, government intervention to correct market failure
  • The difference between unit (specific) taxes and ad valorem taxes, including diagrams
  • Indirect tax as a way of correct market failure

HOW TO USE THIS LESSON

Follow along in order of the activities shown below. Some are interactive game-based activities, designed to test your understanding and build your awareness of real-life applications of indirect taxes. Others are based on short videos, that including activities for you to think about and try at home.

If you would like to download a simple worksheet to accompany the video activities, you can download it here: Online Lesson Indirect Taxes. Alternatively, just use a piece of paper.

LET'S GET STARTED...

The first activity below gives you a chance to remind yourself about the key types of market failure.

VIDEO ACTIVITY 1

In this video activity, you take the role of a parent designing the best 'policies' to manage their child's behaviour. This is similar to how governments need to develop a range of policies for managing the behaviour of their citizens.

Introduction to Indirect Tax Video 1

VIDEO ACTIVITY 2

In this video and activity, you explore the nature of different types of market failure, and which can potentially be tackled using an indirect tax.

Introduction to Indirect Tax Video 2

VIDEO ACTIVITY 3

When we are evaluating the impact of policies, such as indirect taxes, in tackling market failure, we need to consider the impact on a range of stakeholders. This video provides a short introduction to the different types of stakeholder that you could consider.

Introduction to Indirect Tax Video 3

Now, take a few minutes to play a quick game. Can you match the type of tax to its UK annual revenue?

VIDEO 4

In this video, we explore the different types of indirect tax, using examples and relevant diagrams.

Introduction to Indirect Tax Video 4

VIDEO 5

Being able to correctly identify the area representing tax revenue on a diagram is a small, but important, skill. This video takes you through the method needed for doing that, and gives you a chance to practice on your own.

Introduction to Indirect Tax Video 5

VIDEO 6

In this summary video we combine all your previous knowledge of externalities with your new knowledge of indirect taxes. We show how indirect taxes can be used to tackle externalities and achieve a socially optimal equilibrium.

Introduction to Indirect Tax Video 6

Before you finish, try this short quiz on the different types of excise duty used in the UK. Remember that examples and context are really important in your exams.

ADDITIONAL READING

This article from EY is a great read, exploring some of the controversies surrounding the rising use of indirect taxes by governments as a means of raising revenue. Read the article, jot down some summary notes, and consider the extent to which you agree / disagree with the key points.

ADDITIONAL TEACHER GUIDANCE

This online lesson includes:

  • 6 x video-based activities, totalling around 30 minutes of guided video
  • 15 to 20 minutes (throughout the videos) of "thinking time" and short activities
  • 3 interactive games, reviewing knowledge of the types of market failure as well as real-world examples and data relating to indirect taxes - these games can be played several times
  • An enriching extension article for students who are particularly interested in developing their understanding and extending their learning

If students complete all tasks fully, this comprises around 1.5 hours work.

You can find a follow-up lesson, exploring evaluation issues for indirect taxes, here.

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