Lead-in:
1. to raise revenue – підвищувати дохід, прибуток
2. excise duties – акцизний збір
3. tax on profit – податок на прибуток
4. income tax – прибутковий податок
5. to levy taxes – стягувати податки
6. the Board of Inland Revenue – Податкова Управа (Англія)
7. PAYE – Pay Аs You Earn – виплачування податків відрахуванням з заробітної плати
8. income tax liability – загальна сума податку, що підлягає виплаті
9. health insurance – страхування здоров’я
10. tax haven – фіскальний оазис, “податкове сховище”
11. money laundering – відмивання грошей
The primary function of taxation is to raise revenue to finance government expenditures, but taxes can have other purposes. Indirect excise duties, for example, can be designed to dissuade people from smoking and drinking.
Governments can also permit various measures reducing companies’ tax bills.
There is always a lot of debate as to the fairness of tax systems. Business profits, for example, are generally taxed twice: companies pay tax on their profit (corporation tax in Britain, income tax in the USA), and shareholders pay income tax on dividends. The most important taxes are personal and corporate income tax. Income tax in most countries is progressive; it is one of the ways by which governments can redistribute wealth. For tax purposes, corporate income is defined as revenue minus expenses. UK personal taxation is both simple and relatively low. There are two rates: 25 per cent on taxable income up to £ 23.700, and 40 per cent on income above this figure.
How is personal tax levied? In Great Britain the Board of Inland Revenue obliges employers to operate a PAYE (Pay As You Earn) scheme, which means the tax is deductible at source, from empoloyees’ wages or salaries; in other words, by the employers before making out the monthly salary cheque or bank transfer to the employee. The tax is then collected directly from the employer.
At the same time we should mention that the employer is obliged to deduct National Insurance from the employee’s salary – the employee’s contribution being roughly 9 per cent of income, the employee’s ranging from 5 to 10 per cent. The higher the tax rates, the more people are tempted to cheat. Lots of people have undeclared, part-time evening jobs with small and medium-sized family firms, on which no one pays any tax or national insurance.
To reduce income tax liability, some employers give highly-paid employers lots of “perks” instead of taxable money, such as company cars, free health insurance. Life insurance policies, pension plans by which individuals can postpone the payment of tax, are known as tax shelters. Donations to charities that can be subtracted from the income on which tax is calculated are described as tax deductible.
Companies have a variety of ways of avoiding tax on profits. They can make a tax loss, multinational companies often set up their head offices in such countries as Monaco, the Bahamas, where taxes are low; such countries are known as tax havens.
Criminal organizations practise “money laundering” – they pass money through a series of companies in order to disguise its origin from tax inspectors.
Different tax systems in different countries create problems, so the question of the tax harmonisation within the European Community is being discussed. Changes in tax-planning techniques will create a number of tax opportunities: companies in low-tax countries will have a competitive advantage over those in high-tax ones.
Ø Questions for comprehension check-up and discussion:
1. What is the main function of taxation?
2. Why do you think there is a lot of debate about the fairness of tax systems?
3. What are the most important taxes?
4. What do some employers do to reduce income tax liability?
5. How do companies avoid tax on profits?
6. What is money ‘laundering’?
7. Do you think the question of tax harmonisation is likely to be solved?
26. STOCK EXCHANGE
Lead-in:
1. currency market – валютна біржа
2. commodity exchange – товарна біржа
3. labour exchange – біржа праці
4. stock market – фондова біржа
5. gilt-edged securities – першокласні цінні папери
6. bid price – курс покупця
7. offer price – курс продавця
8. bull – “бик”, спекулянт, що грає на підвищення ціни
9. bear – “ведмідь”, той, що грає на пониженні ціни
10. stag – “олень”, той, що купує нові акції, щоб їх одразу продати
11. put option – опціон продавця
12. call option – опціон покупця
13. over-the-counter market – ринок позабіржової торговлі
There are different kinds of exchanges: currency markets, commodity exchanges, labour exchanges. We shall try to consider stock markets and stock exchanges, which are the most important financial institutions in the sphere of international economic relations.
Stock markets play a significant role in the economy of any country.
Stock markets are control centres where businesses and governments come to raise money and expand their operations. There are actually two different markets for stocks: the new issues market or the primary market, where stocks are offered for sale for the first time, and the secondary market, where stocks can be bought and sold by individuals and institutions. The phrase “the stock market” means many things: it is a place where stocks are traded, and it also refers to the biggest and most important stock exchanges in the world: the New York Stock Exchange, the London Stock Exchange, the Nasdaq Stock Market, based in Washington, DC, and the Over-the Counter Market (OTC).
A stock exchange is a market for dealings in stock and shares, handling gilt-edged and all kinds of commercial and industrial shares. The London Stock Exchange provides a market for British government stocks and the stocks and bonds of a large number of foreign governments and corporations. Only members are admitted to the stock exchange and business is transacted according to a prescribed set of rules. Before the “Big Bang” on 27 October 1986 there were about 4,100 Stock Exchange members (jobbers, middlemen who bought and sold shares from other traders on the Stock Exchange, and brokers).
There are no jobbers in the Stock Exchange now, they are market makers. A market maker buys and sells securities making money by charging a commission on each transaction. Anyone who wants to buy or sell shares on the Stock Exchange does it through the broker who acts as a middleman between a seller and a buyer for a commission. Companies apply to the Stock Exchange to have their shares listed. Only “quoted” shares can be bought or sold on the Stock Exchange. A Stock Exchange quotation is the price of a share which usually gives the bid price and an offer price. The bid price (or the selling price) differs from the offer price and the difference between them is called the “spread”. The Stock Exchange quotations appear daily in the financial press and the financial section of newspapers.
The greater part of the business transacted on stock exchanges is investment business, but a small part consists of speculative operations. There are three kinds of speculators: bulls, bears and stags. Speculation is also possible in the form of options: call options, put options and put and call options.
The price of the stock in the market reflects investor demand. The tendencies of the market are indicated by indexes. Some of the most important indexes are: FT Actuaries Share Indices, FT – Stock Exchange 100 Share Index (FT – SE 100 or Footsie), based on the prices of 100 leading companies (this is the main London index, DOW JONES, FAS, NIKKEI, etc.).
The biggest and the most important stock market in the world is the New York Stock Exchange. NYSE is also known as the Big Board and the Exchange, it was founded in 1792 and is located at 11 Wall Street in New York City.Brokers buy and sell stock in about 2,570 different companies at the NYSE. AMEX stands for American Stock Exchange; it has the second biggest volume of trading in the US, here brokers buy and sell Stocks in over 840 companies. There is one more market place: it is trading of common stock “over-the-counter” or “ OTC”.
Most securities other than common stock are traded over-the-counter, through vast telephone and other electronic networks that link traders.
Ø Questions for comprehension check-up and discussion:
1. What types of exchanges do you know?
2. How many markets are there for stocks?
3. What is a stock exchange?
4. What is the role of a market maker?
5. What is a Stock Exchange quotation?
6. Give the names of the most important stock exchange indexes.
7. What do the letters “OTC” stand for?
