1. Define taxation?

Give brief explanations of different types of taxes

Taxation is a fee levied by a government on a product, income, or activity. It is
involuntary and is enforced. Taxes are enforced on income, e.g wages, expenditure,
and wealth, part of the value of a person’s assets to the government. There are so
many different types of taxation, such as income tax, corporation tax, sales tax, etc. But
the two main types of taxation are direct and indirect. A direct tax is a tax that a person
or company pays directly. For example, income tax is taken out of your salary. An
indirect tax is paid by a third party. For example, when you buy a TV, there is a VAT
charge which is included in the price, the consumer does not pay, but the firm who sells
the good is responsible for paying the tax to the government on your behalf.

2. Give 5 ways used by the government to finance the public expenditure

The 5 ways the government finance their public expenditures are:
● Taxation
● Interest: payments on loans of money made by the public sector
● Rent: from its ownership of land and buildings
● Dividends and Profits: from publicly-owned industries
● Public Sector Borrowing

3. What do you understand by a tax burden?

I understand the term tax burden by the hardships/distress of paying tax. It's the amount
of income, property, or sales tax raised on an individual or business. Tax burdens vary
depending on several factors including income level, jurisdiction, and current tax rates.
Income tax burdens are typically satisfied by deductions from an individual's paycheck
each time he or she is paid. Depending on the number of allowances claimed by the
individual, a tax burden may exceed the total amount of money deducted during the
taxable period.

4. How are taxes used? Give 6 ways.

These are the 7 ways the government spend taxes:
● Health programs
● Military
● Social Security
● Interest on the national debt
● Veteran benefits
● Food and agricultural benefits
● Education programs

5. Describe 3 taxation systems

The 3 taxation systems are:
 ● Regressive tax levies the same percentage on products or goods purchased
regardless of the buyer's income and is thought to be disproportionately difficult
on low earners.
● A proportional tax applies the same tax rate to all individuals regardless of
income.
● A progressive tax imposes a greater percentage of taxation on higher income
levels, operating on the theory that high-income earners can afford to pay more.

6. Analyse the difference with appropriate examples between direct taxation and
indirect taxation
Indirect taxes are taxes that can be passed on to another entity or individual. They are
usually imposed on a manufacturer or supplier who then passes on the tax to the
consumer. The most common example of an indirect tax is the excise tax on cigarettes
and alcohol.
Direct taxes are one type of taxes an individual pays that are paid straight or directly to
the government, such as income tax, poll tax, land tax, and personal property tax. Such
direct taxes are computed based on the ability of the taxpayer to pay, which means that
the higher their capability of paying is, the higher their taxes are.

7. Define what a budget is, and give a brief explanation of the meaning of budget
deficit and a budget surplus.
A budget is an estimate of income and expenditure for a future period as opposed to an
account that records the financial transaction. A budget deficit is when spending
exceeds income. The term applies to governments, although individuals, companies,
and other organizations can run deficits. A deficit must be paid. If it isn't, then it creates
debt. Each year's deficit adds to the debt. As the debt grows, it increases the deficit in
two ways. First, the interest on the debt must be paid each year. This increases
spending while not providing any benefits. Second, higher debt levels can make it more
difficult to raise funds. Creditors become concerned about the borrower's ability to repay
the debt. When this happens, the creditors demand higher interest rates to provide a
greater return on this higher risk. That further increases each year's deficit.
A budget surplus occurs when tax revenue is greater than government spending. With a
budget surplus, the government can use the surplus revenue to pay off public sector
debt. Budget surpluses are quite rare in modern economies because of the temptation
for politicians to spend more money and cut taxes. A budget surplus can either be
expressed in nominal terms or as a percentage of a nation’s national income (GDP).
The budget surplus might be adjusted to take into account the effects of the economic
cycle. One of the causes of a budget surplus is strong tax revenues e.g. from high
employment, rising incomes, or taxes of profits/rents from natural resource exports. A
surplus allows a government to repay some of its existing national debt. This might lead
to a fall in bond yields which makes future government borrowing less expensive.
 8. What is the National Debt? How does the government obtain debt?
The national debt is the public and intragovernmental debt owed by the federal
government. It’s also called sovereign debt, country debt, or government debt. It
consists of two types of debt. The first is debt held by the public. The government owes
this to buyers of its bonds. Those buyers are the country’s citizens, international
investors, and foreign governments. The second type is intragovernmental debt. The
federal government owes this to other government departments. It often funds
government and citizens’ pensions. An example is the U.S. Social Security retirement
account. The federal government adds to the debt whenever it spends more than it
receives in tax revenue. Each year's budget deficit gets added to the debt. Each budget
surplus gets subtracted. The government obtains debt by raising taxes and providing
money to pay expenditures, while also stimulating the economy through public
spending.

Write an essay on the Zambian Debt situation

Over the past few years, Zambia’s debt situation has been a major topic of discussion in
both local and international news. This has largely been due to Zambia’s growing debt:
in 2011, Zambia’s total debt was recorded at US$3.5 billion and as of September 2018,
this had risen to US$14.4 billion (US$9.4 billion external debt and K51.9 billion domestic
debt). Concerns expressed by various stakeholders have been that Zambia’s debt
contraction has not increased growth but has instead become a burden on the
economy.
During the first six months of 2018, wages and salaries accounted for 42 percent of
domestic revenues and 29 percent accounted for interest payments. Only 30 percent of
government revenues were spent on all the remaining government programs, which
drive the country’s development, such as health, education, social protection,
agriculture, and so on. With debt servicing costs amounting to 30 percent of the national
budget, Zambia’s debt weakens the economy by forcing the government to spend
money on interest payments when it should be spending on national development.
Ultimately a lack of investment in public services has a long-term impact on the social
well-being of Zambians. In 2017 this scenario led the International Monetary Fund (IMF)
to declare Zambia at high risk of debt distress raising concern among investors,
international cooperating partners, and the general public.
High debt levels have also left Zambia in a risky financial position. Much of the country’s
debt is contracted in foreign currency, therefore, when the kwacha weakens the amount
that Zambia owes in real terms will increase significantly. This fear was actualized in
September 2018 when the Kwacha depreciated by 20 percent. The growing cost of
servicing the increasing levels of debt is beginning to squeeze out domestic spending
and indications are government arrears are beginning to be a drag on the economy.
Zambia’s debt situation has negative implications on business owners and consumers
making the cost of doing business and the cost of living very high. In this environment
the need to influence the public and policymakers to understand the consequences of
debt and promote value for money policies through well-evidenced research is critical.
High debt levels leave Zambia in a very difficult position. A lot of the country’s debt is
contracted in foreign currency, which means if the kwacha weakens due to external
factors, such as the copper price falling unexpectedly, the amount that Zambia owes in
real terms will increase significantly. High debt servicing costs weaken the economy by
forcing the government to spend money on interest payments when it should be
spending on national development. Health, education, social protection are just three
areas, which are significantly impacted, as money spent on interest cannot be spent on
these sectors. Lack of investment in these services has a long-term impact on the social
well-being of Zambians. High debt levels also leave the Government unable to pay its
obligations to companies and contractors who have been engaged for various
development projects.