0455/21/O/N/23

Digital money, such as cryptocurrencies, is increasingly being used.

Digital money transactions take place on electronic devices such as
computers and smartphones. However, there can be market failure
due to external costs arising from high energy usage of
non-renewable sources. One way of reducing external costs is to tax
the product.
 Identify two types of tax. [2]

0455/23/O/N/22

Romania’s indirect tax rate was 19% between 2017 and 2019. There
is a high proportion of foreign multinational companies (MNCs),
especially US MNCs, in Romania. MNCs have helped to increase
productivity in Romania and lower its unemployment rate. There are
also benefits of MNCs to their home countries.

Define, with an example, an indirect tax. [2]

0455/22/O/N/22

In 2019, Russia had an unemployment rate of 4.6%. Russia

experienced full employment in the past. Its government wants
unemployment to be lower. In 2018, the Russian government cut its
spending which may have increased poverty. In both 2018 and
2019, the government did not change its income tax rate. Russia
operates a proportional tax rate system.
 Explain the difference between a proportional income tax
system and a progressive income tax system. [4]

0455/21/M/J/22

Australia’s foreign exchange rate fluctuates. The value of Australia’s

exports is regularly greater than the value of its imports. Australia is
Papua New Guinea’s main trading partner. In 2019, the government
of Papua New Guinea increased income tax to reduce its inflation
rate. It used other policy measures to increase its economic growth
rate.
 Analyse how an increase in income tax can affect a
country’s inflation rate. [6]
0455/22/F/M/22

South Africa (SA) experienced a recession in the second half of 2019

and an unemployment rate of 29%. Only a small proportion of this
unemployment was frictional. South Africa’s foreign exchange rate
fell from 1 SA rand = US$0.08 in 2018 to 1 SA rand = US$0.06 in
2019. South Africa had reduced import tariffs, but in 2019 some
South African economists suggested tariffs should be used to protect
its infant industries.
 Discuss whether or not a reduction in income tax will end
a recession. [8]
0455/22/F/M/21

It is estimated that half of Egyptian men smoke. This is one of the

highest rates in the world. In recent years the Egyptian government
has increased the tax on cigarettes. The government and central
bank have also tried to reduce inflation and improve Egypt’s
international trade performance. The Egyptian government could
use subsidies to reduce its deficit on the current account of its
balance of payments.
 Identify two qualities of a good tax. [2]
 Explain two reasons why governments tax cigarettes. [4]
0455/22/O/N/20

The population of Hungary is the most obese in Europe. Hungarians

eat fewer vegetables than most Europeans and more food types that
may be considered to be demerit goods. In 2017, the Hungarian
government introduced a tax on unhealthy food, known as the chips
tax. The tax has had some success in moving demand to healthier
foods. Some economists suggest that governments should use price
controls as well as taxes to influence the food market.
 Analyse the effects on income distribution and tax
revenue of an increase in indirect taxes. [6]
0455/22/O/N/20

Mexico has a history of trade deficits. The government is moving the

economy closer to free trade, to try to improve its macroeconomic
performance. It was predicted in 2017 that Mexico’s economy would
experience a small rise in its unemployment rate. In 2017 the
economy’s inflation rate was 6.6%, the highest rate since 2001. A
number of policy measures may be used to reduce inflation,
including increasing the rate of income tax.
 Discuss whether or not an increase in the rate of income
tax will reduce inflation. [8]

0455/21/O/N/20

The election of a new president in South Africa in 2018 led to

improvement in business and consumer confidence. Inflation rates
fell despite a rise in total demand. One government policy measure
established areas known as economic zones where firms pay lower,
or no, taxes. These zones encourage domestic firms to become
internationally competitive which could reduce the deficit on the
current account of South Africa’s balance of payment.
 Discuss whether or not lower taxes on firms will be
beneficial for an economy. [8]

0455/23/M/J/20

Ireland has one of the lowest rates of corporation tax in Europe. This
has encouraged many multinational companies (MNCs) to produce
in Ireland. Other reasons why firms want to produce in Ireland
include access to freer trade with other European countries, higher
labour productivity and government grants.
 Explain two reasons why governments levy taxes. [4]

0455/22/M/J/20

In 2017, the Japanese government announced improvements to its

tax system. The amount of tax raised is influenced by the size and
age distribution of a country’s population. Japan’s birth and death
rates are falling, its population is ageing, and it has low immigration.
Overall, Japan’s population is decreasing.
 State two qualities of a good tax. [2]
0455/21/M/J/20

Economists are uncertain about the future United States (US)

macroeconomic performance. For instance, in recent years, US
unemployment has fallen while the deficit on the current account of
the balance of payments has fluctuated. Whether its current account
deficit will rise or fall in the future may be affected by proposed tax
cuts. Some economists suggest that the US government should not
be concerned about the country’s current account deficit.
 Analyse how tax cuts could increase exports. [6]

0455/22/F/M/20

The Chinese government reformed the Chinese tax system in 2016.

It extended VAT (sales tax) from the sale of goods to the sale of
services enabling it to cut the corporation tax rate. Taxes on goods
and services are usually regressive. The Chinese government
wanted to raise living standards and hoped that a cut in the tax rate
firms pay would attract multinational companies (MNCs) to the
country.
 State two reasons for levying taxes. [2]
 Explain the difference between a progressive tax and a
regressive tax. [4]
 Analyse how a cut in the rates of corporation tax and
income tax may influence the number of MNCs setting up in
the country. [6]

0455/22/

Teachers in many countries oppose their governments’ cuts in

spending on education. They worry that this could reduce the
standard of education and also the welfare of teachers employed in
the state sector. Some teachers specialise in teaching one subject
while others teach a number of subjects.
 Explain two reasons why a government may want to cut
spending on education. [4]

0455/23/M/J/18

The state of California has the most progressive tax system in the
USA. The tax system helps reduce high poverty rates. Policy makers
are considering reforming sales tax in the state to include services,
while reducing the use of direct taxes.
 Define progressive tax. [2]
 Discuss whether a government should increase indirect
taxes and whether it should reduce direct taxes. [8]

0455/22/M/J/18
In February 2016, share prices on stock exchanges fell throughout
the world. There were a number of reasons for this; including
concerns about the slowdown in world growth, the possibility of
deflation and unemployment, and fears that some commercial
banks could go out of business.
 Discuss whether or not government policy measures to
reduce unemployment will cause inflation. [8]

0455/21/M/J/18

More governments are imposing taxes on unhealthy food and drinks.

Such taxes are usually regressive. Some of these governments are
also increasing their spending on healthcare. In other countries
healthcare is provided by the private sector. The number of state-
owned enterprises is declining in a number of countries due to
privatisation.
 Define regressive tax. [2]
 Analyse why a government imposes taxes. [6]

0455/21/M/J/18

In 2014, the government of Kazakhstan devalued its currency, the

tenge. A year later the country still had a current account deficit.
Therefore, in 2016 it considered adopting a floating exchange rate
which might help to remove the deficit. However, it had concerns
that this might affect the country’s inflation rate which was already
high at 17%.
 Analyse how fiscal policy measures could reduce
inflation. [6]

0455/22/F/M/18

In March 2016, the Canadian government announced increases in

government spending including an increased subsidy to
environmentally friendly technology. It also announced that high
income earners would face an increase from 29% to 33% in the
highest rate of income tax. Changes in government spending and
taxation can influence a country’s inflation rate.
 Discuss whether or not an increase in the highest rate of
income tax will benefit an economy. [8]