Tax system and factors that affect it

Changes incurred on various types of taxes in the tax system have specific influences on the economy in any country. Personal tax can influence price levels in a given economy whereby a reduction in such kind of tax leads to a reduction in the general price level on most of the consumer goods. This is mainly done to favour the general public. Taxation adjustments could be done alongside policy adjustments as a way of attempting to reduce tax. While this is done to favour the consumers in the economy, there are certain implications on the economy as well as on individual firms. Deducing tax in favour of the public has implications on firms’ productivity and their general performance.

A firm’s manager has the obligation of addressing any changes in the tax policies especially when the personal tax system is changed. Policy adjustment in the tax system should be addressed after they are made effective so that employees adjust accordingly (Robert, 2000). Personal tax reduction is known to increase the net income of employees. The increase in personal taxes could mean that employees are highly motivated to an extent that their productivity may increase (Robert, 2000). This could be used by the management as a factor behind their immediate response to make it clear on the prevailing tax policies. It may however seem difficult to address the issue when the tax policy change is on a personal tax increment. Increasing taxes has a direct effect of influencing motivational behavior of employees. This happens because their buying power reduces making it more difficult to afford all goods and services they used to afford before the policy change.

Reduction or increment in the personal tax policy has an impact on the price level in an economy. The effect on price level is never direct by is a problem initiated by the changes in consumer buying behavior. Consumers would respond to personal tax deduction by buying more of the goods and services they used to buy. The increase in demand is reflected to the increase in personal tax. In this case, of increased net income, every affected consumer in the market would now turn into a buying behavior in which they would choose larger baskets of goods or services (Gerald, 2008). This is done while every consumer tries to go higher on his or her indifference curve where the utility level is higher as well. Unfortunately, this hardly holds for long since consumers turn to the cheaper baskets whose utility level is less than initially when the price level starts to shoot up. They finally find themselves in an indifference curve lower than their initial indifference curve but this comes as the market forces of demand and supply resists the increased demand so that the market restores back to equilibrium (Robert, 2000).

Once the utility level of consumers is lower, consumers’ demand for goods and services becomes low as well. The market has its unique demand and supply forces in which people resist from purchasing goods at elevated prices while suppliers marked by various firms resist selling their goods and services at price lower than at a certain level. These two levels from both the consumer and supplier sides bring about the market equilibrium (Robert, 2000). Any adjustments on either of the two sides create a change in the market equilibrium and the productivity by firms.

In this case, study personal tax creates an increase in the net income of employees who turn out to be consumers of products and services from various firms including those firms they work in. The first implication is an increased productivity initiated by employees’ motivation from the increment in their net incomes. This holds for a while and could be strengthen by an increased demand since people now have higher income than before (Gerald, 2008). The firm in this case would increase its productivity in order to meet the prevailing demand. The increased demand is created by consumers as they try to maximize their utilities by buying more goods and services.

The other effect on the economy that subsequently creates effect on firm’s productivity is the increased money supply in the economy. This is a condition whereby people have more money than they used to have before and hence demand more of goods and services. To respond to the increased demand, the firm in this case, together with other suppliers would increase their supply through increased productivity of goods and services. Since the demand is high, suppliers sell their supplies at higher prices thereby increasing the price level in the economy. This creates conditions of prices failing to fall back once the demand decreases (Robert, 2000). The reduced demand comes in because of a reduction in the real income of consumers. Prices are flexible upwards but sticky downwards an indication that, firms are not ready to cut down the prices for their goods and services. This also happens to the firm in this case study and under such situations, the firm would respond by cutting on its productivity. Cutting down productivity is done to avoid unnecessary losses arising from excess supply over the prevailing demand. Cutting down the firm’s productivity is done up to a point where the marginal productivity is equal to the marginal revenue of the firm (Robert, 2000). This condition may bring about many adjustments within the firms including resource utilization and labor structure.

The structure of the firm would have to be adjusted once the policy creates a low demands because of increased price level in the economy. The capital of the firm may be fixed to an extent that any adjustments done affect the labor side of the firm. A reduction in productivity would imply that resources are underutilized by the firm. The management has to come up with an effective way of dealing with the inefficiency created (Robert, 2000). The best option is to substitute labor for capital so that the firm would be more capital intense than labor intense but only if the capital is fixed to an extent that the firm can hardly run without much of capital than labor. Decrease in productivity causes the marginal productivity of labor to decrease. In this case, much of the labor would be less beneficial to the firm. Given the firm would be more interested on quality than on quantity, capital intensity would be more important than labor intensity. The goal is to capture more consumers at a higher price to maintain the firm’s level of profitability.

The firm in this case study and its general business environment would be affected to a certain extent by both internal and external factors. Internal factors affecting the firm’s business environment would include issues revolving around labor and capital, both financial capital and human capital. On the other hand, external factors include external forces including government regulations, competition from other firms, economic conditions, and the geographical environment. Labor and capital are internal factors and determine the quality and quantity produced and supplied in the market. Poor management strategies in substitution labor for capital or substituting capital for labor would require high skills as part of the human capital (Robert, 2000). In this case, since productivity freezes as the market demand goes down, some workers do not add to the marginal productivity of the firm while capital remains constant. The excess labor should be suspended. Bringing this condition causes an adjustment from quantity focusing to goal setting on quality improvement. Poor or inadequate skills could also lead to poor strategic management and underprivileged decisions on productivity and marketing. Skills are always upgraded to keep employees and management up to the prevailing technologies. Technology here comes in as both an internal factor influencing the firm’s business environment and an external factor having an influence on the same. As an internal factor, technology is part of the human resources that is initiated to improve on capital productivity.

Incorporating advanced technologies would make the firm operate better on more capital intense condition than on labor intense condition. Quality products and services because of technology favor the firm’s business environment. Higher technologies from competitors bring down the firm’s performance within its business environment. The firm also has to observe other external forces such as the government regulations and policies like the case of tax deduction or increment (Robert, 2000). There should be a way of projecting on the future negative outcomes and create strategies that would save the firm from such effects. When the government generates policies in favor of the general public or consumer, there would be a positive impact and a negative impact from the policy. It is good to aim at maximizing benefits from the positive side of the policy but still generate mechanisms that would curtail and negative effects on the firms especially if the effect is realized in the long run. The same caution has to be applied on the effects of the firm’s business environment by environmental factor. Every good aspect of environmental factor influencing the firm’s business environment should be observed as well for the firm to maximize on the related benefits. The firm would only advance under bad business and economic conditions given that all good aspect of both its internal and external environments are utilized with mitigation measures be taken on any foreseen negativities.








Gerald Auten, R. C. (2008). The 2001 and 2003 Tax Rate Reductions: An Overview and Estimate of the Taxable Income Response. National Tax Journal, Vol. 61 No.3 , 345-364.

Robert Carroll, D. H.-E. (2000). Income Taxes and Entrepreneurs: Use of Labor. Journal of          Labor Economics, Vol.18 No.2 , 324-351.




Get Professional Assignment Help Cheaply

Buy Custom Essay

Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?

Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.

Why Choose Our Academic Writing Service?

  • Plagiarism free papers
  • Timely delivery
  • Any deadline
  • Skilled, Experienced Native English Writers
  • Subject-relevant academic writer
  • Adherence to paper instructions
  • Ability to tackle bulk assignments
  • Reasonable prices
  • 24/7 Customer Support
  • Get superb grades consistently

Online Academic Help With Different Subjects


Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.


Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.

Computer science

Computer science is a tough subject. Fortunately, our computer science experts are up to the match. No need to stress and have sleepless nights. Our academic writers will tackle all your computer science assignments and deliver them on time. Let us handle all your python, java, ruby, JavaScript, php , C+ assignments!


While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.


Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.


In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.


Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.


We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!


We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.


Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.

What discipline/subjects do you deal in?

We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.

Are your writers competent enough to handle my paper?

Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.

What if I don’t like the paper?

There is a very low likelihood that you won’t like the paper.

Reasons being:

  • When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
  • We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.

In the event that you don’t like your paper:

  • The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
  • We will have a different writer write the paper from scratch.
  • Last resort, if the above does not work, we will refund your money.

Will the professor find out I didn’t write the paper myself?

Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.

What if the paper is plagiarized?

We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.

When will I get my paper?

You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.

Will anyone find out that I used your services?

We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.

How our Assignment  Help Service Works

1.      Place an order

You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.

2.      Pay for the order

Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.

3.      Track the progress

You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.

4.      Download the paper

The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.

smile and order essaysmile and order essay PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!

order custom essay paper