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Economics IGCSEPDF 59
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■ Regressive Nature: Indirect taxes are regressive; they take a larger
proportion of income from low-income earners who have little choice but
to buy necessities. They have no ability to save more, it just reduces their
living standards.
Inflationary: Raising indirect taxes can lead to cost-push inflation.
■ Alternative Policies are better: Increasing interest rates is a more
direct and arguably more effective policy. It directly increases the reward
for saving for everyone, without the regressive side-effects.
■ Government Savings Schemes: Policies like tax-free savings accounts
directly incentivise saving.
Conclusion/Evaluation: While increasing taxes on spending might discourage
some discretionary consumption, it is likely not the most effective way. It is a
blunt instrument that harms low-income earners disproportionately. A policy of
increasing interest rates is more direct and targeted at the act of saving itself and
is likely to be more effective across different income groups.
3.3 Workers
This section covers the labour market, including the demand for and supply of labour, wage
determination, and reasons for wage differentials.