Laffer curve and Multilateral net settlement system: Difference between pages

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The Laffer curve plots total long-term tax revenues against the rate of tax.
''Funds transfer''.


It illustrates the observation that when tax rates are raised too high, tax revenues (tax yield) will decline.
A settlement system in which each settling participant settles (typically by means of a single payment or receipt) the multilateral net settlement position which results from the transfers made and received by it, for its own account and on behalf of its customers or non-settling participants for which it is acting.
 
This is because tax revenues are a product of the rate of tax, and the tax base.
 
 
When tax rates are higher, the tax base tends to decline.
 
In the extreme case of a 100% tax rate, the tax revenue is likely to be zero, because there is no economic incentive for undertaking the activities to earn taxable income.
 
 
However, if tax rates are very low, this will also erode tax revenues.
 
For example, if tax rates are 0%, then tax revenue will of course be zero.
 
 
If the purpose of setting tax rates were to maximise long-term tax revenues, there would be a theoretically 'optimal' rate of tax, somewhere between 0% and 100%, that would maximise total tax revenues.




== See also ==
== See also ==
* [[Tax yield]]
* [[Multilateral netting]]
* [[Tax rate]]
* [[Settlement institution]]
* [[Tax base]]
* [[Phillips curve]]
 
[[Category:Accounting,_tax_and_regulation]]

Revision as of 08:22, 22 August 2013

Funds transfer.

A settlement system in which each settling participant settles (typically by means of a single payment or receipt) the multilateral net settlement position which results from the transfers made and received by it, for its own account and on behalf of its customers or non-settling participants for which it is acting.


See also

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