Unit 22: GOVERNMENT AND TAXATION

SECTION 1: READING
PRE-READING TASKS
Discussion
Some people argue that too much regulation is bad for business. Do you agree? Could any of the
following activities not be undertaken or regulated by the government, but left to the private sector and
the market system in your country?
• education
• healthcare
• low-income housing
• defence (the armed services – army, navy, air force)
• the police, the justice system, prisons, and so on
• public transport (trains, buses, and so on)
• social security (unemployment and sickness benefits, old age pensions)
• working conditions (working hours, child labour, minimum wages, and so on)
• traffic regulations (driving tests, speed limits, seat belts, the alcohol limit, parking restrictions, the
safety of cars, the size and weight of lorries and trucks, and so on)
• health, safety and cleanliness regulations (concerning factories, shops, restaurants, food, medicines,
the disposal of chemical and nuclear waste, and so on)
• the sale of alcohol, drugs, guns, and so on

Vocabulary preparation
➢ Match the words with the definitions below.

allocation of resources – commercialize – externalities –

infrastructure – optimal – outcome – unfettered

1. basic system and services such as transport and power supplies

2. distribution according to a plan
3. not limited by any rules or controls
4. positive or negative consequences (benefits or costs) of economic activities experienced by other
people.

CÙNG BELL QUA MÔN TIẾNG ANH 1

5. the best or most likely to bring success.
6. the result or effect of an action or situation
7. to organize something to make a profit

WHILE-READING TASKS

THE ROLE OF GOVERNMENT

The American economist Milton Friedman was well-known for his views on government. Read the extracts
from Free to Choose by Milton and Rose Friedman.

Though the United States has not adopted central economic planning, we have gone very far in the past 50
years in expanding the role of government in the economy. That intervention has been costly in economic
terms. The limitations imposed on our economic freedom threaten to bring two centuries of economic
progress to an end. Intervention has also been costly in political terms. It has greatly limited our human
freedom.

An essential part of economic freedom is freedom to choose how to use our income: how much to spend
on ourselves and on what items; how much to save and in what form; how much to give away and to
whom. Currently, more than 40% of our income is disposed of on our behalf by government at federal, state
and local levels combined.

As consumers, we are not even free to choose how to spend that part of our income that is left after taxes.
Our physician is not free to prescribe many drugs for us that he may regard as the most effective for our
ailments, even though the drugs may be widely available abroad. We are not free to buy an automobile
without seat belts.

Another essential part of economic freedom is freedom to use the resources we possess in accordance
with our own values – freedom to enter any occupation, engage in any business enterprise, buy from or
sell to anyone else, so long as we do so on a strictly voluntary basis and do not resort to force in order to
coerce others.

Today you are not free to offer your services as a lawyer, a physician, a dentist, a plumber, a barber, a
mortician, or engage in a host of other occupations, without first getting a permit or licence from a
government official. You are not free to work overtime at terms mutually agreeable to you and your
employer, unless the terms conform to rules and regulations laid down by a government official.
CÙNG BELL QUA MÔN TIẾNG ANH 2
You are not free to set up a bank, go into the taxicab business, or the business of selling electricity or
telephone service, or running a railroad, busline, or airline, without first receiving permission from a
government official.

Although these examples only scratch the surface, they illustrate the fundamental proposition that
freedom is one whole, that anything that reduces freedom in one part of our lives is likely to affect freedom
in the other parts.
Freedom cannot be absolute. We do live in an interdependent society. Some restrictions on our freedom
are necessary to avoid other, still worse, restrictions. However, we have gone far beyond that point. The
urgent need today is to eliminate restrictions, not add to them.
 Complete the guided notes:
1. The two areas that the intervention of the government affects
………………………………………………………………………………….
2. The consequence of increased government intervention in the economy:
……………………………………………………………………………………………..
3. Two ways in which the freedom in terms of income is restricted:
……………………………………………………………..
……………………………………………………………….
4. What 40% refers to:
………………………………………………………………………………………………………
5. Examples of medical and road safety legislation that control consumers’ spending
……………………………………………………………………………………………………..
6. According to Milton, the necessary restriction regarding professional occupations business and trade
………………………………………………………………………………………………………….
7. The requirement for setting up a new business under the government’s control
………………………………………………………………………………………………………….
8. The condition for extra work under the government control
………………………………………………………………………………………………………….
9. Their objection to the law regarding labour contracts:
……………………………………………………………………………………………………………
10. The Friedmans’ argument for eliminating restrictions
………………………………………………………………………………………..
………………………………………………………………………………………….

CÙNG BELL QUA MÔN TIẾNG ANH 3

POST-READING TASK
➢ Vocabulary review: Fill in each gap with one suitable word / expression given in the box.

intervened – threatened – prescribed – coerced – voluntary – permit – permission –

restrict – forced – possess – regulation – eliminate – official – conform

1. We are funded by ……………….. contributions.

2. The dispute ……………….. to spread to other countries.
3. Visitors have to ……………….. to our rules.
4. He had received ……………….. to reproduce copyright material.
5. Some roads may have to be closed at peak times to ……………….. the number of visitors.
6. The doctor ……………….. her a drug called amantadine.
7. The universities were ……………….. to cut staff.
8. He did not ……………….. a sense of humour.
9. The companies must obey the ……………….. of financial markets.
10. He acted outside his authority when he ……………….. in the dispute.

FURTHER READING : TAXATION

➢ Which terms are defined below?
1. The tax people pay on their wages and salaries is called
A. capital transfer tax B. income tax C. wealth tax
2. A tax on wages and salaries or on company profits is a
A. direct tax B. indirect tax C. value-added tax
3. A tax levied at a higher rate on higher incomes is called a
A. flat tax B. progressive tax C. regressive tax
4. A tax paid on property, sales transactions, imports, and so on is a/an
A. direct tax B. indirect tax C. value-added tax
5. A tax collected at each stage of production, excluding the already-taxed costs from previous
stages, is called a/an
A. added-value tax B. sales tax C. value-added tax
6. Profits made by selling assets are generally liable to a
A. capital gains tax B. capital transfer tax C. wealth tax

CÙNG BELL QUA MÔN TIẾNG ANH 4

7. Gifts to family members over a certain value are often liable to a/an
A. capital gains tax B. inheritance tax C. value-added tax
8. The annual tax imposed on people’s fortunes (in some countries) is a
A. added-value tax B. capital gains tax C. wealth tax
9. Making false declarations to the tax authorities is called
A. fiscal policy B. tax avoidance C. tax evasion
10. Reducing the amount of tax you pay to a legal minimum is called
A. creative accounting B. tax avoidance C. tax evasion
11. Countries where taxes are low, where multinational companies often set up their head offices, are
known as
A. money launderers B. tax harbours C. tax havens
12. A small mistake or exception in a tax law, which allows you to avoid paying something, is called
A. an escape B. an excuse C. a loophole

CÙNG BELL QUA MÔN TIẾNG ANH 5

 Read the following statements. Which of them are in favour of taxation and government spending,
and which against? Which of the statements do you find the most convincing, and why?
In favour

Against
SECTION 2: LISTENING (Government intervention)
Michael Kitson is Senior Lecturer in international macroeconomics, and Director of the
Management Studies Tripos, at Cambridge University. Listen to him talking about the role of
government and answer the questions below.
1. Is he is in favour of government intervention?
………………………………………………………………………………………………………
2. What reasons does Michael Kitson give for government spending on education and health?
………………………………………………………………………………………………………
………………………………………………………………………………………………………
3. Why don’t firms invest in very early-stage technologies?
………………………………………………………………………………………………………
………………………………………………………………………………………………………
4. What other areas or activities does Kitson mention?
………………………………………………………………………………………………………
………………………………………………………………………………………………………
Listen to the recordings again and fill in the blanks with the words you hear.

… The second effect is whether we think unfettered free markets alone can ensure the long-term (1)
……………….. ………………... of resources and long-term (2) ……………….. ………………... Markets are very important,
I’m not denying that, but so is the role of government to actually help markets work better. Often
economists talk about notions of (3) ……………….. ……………….. or the fact that markets are not working
properly.

Let’s just think of some of the areas where governments should want to intervene. They may want to
spend, spend money on education, it’s very important, educated workforce. People may not invest
enough in their education if they have to pay for it themselves, and many people wouldn’t be able to
access the resources, wouldn’t be able to get the credit, OK, so it’s the importance of education. Similar
things apply to health, we may not actually buy enough health if we are left to buy it ourselves.

Let’s think about developing new products and technologies. Developing new products and
technologies is highly risky and highly expensive, and highly (4) ……………….. ……………….., but possibly very
big outcomes for the economy as a whole. So it makes ... it’s understandable that firms do not invest in
very early-stage technologies, OK, and ... because it may be (5) ……………….. ……………….. for them, there’s a
good chance they won’t succeed, and if they do succeed, somebody else will be able to (6) ………………..
and ……………….. and benefit from their effects.

CÙNG BELL QUA MÔN TIẾNG ANH 7

These are positive externality effects of government intervention. If government helps to
commercialize science, develop new ideas, those products can then at a later stage be developed and
employed by the market, and by businesses.

I think there are many areas. This is about government in terms of (7) ……………….. ………………... I think it’s
mainly in terms of the areas of education, particularly, again in the areas of transport and (8) ………………..
and ……………….., and increasingly in helping develop science, and helping commercialize science, and
bringing those ideas, which you know, ideas ultimately drive long-term economic growth, and
encouraging those ideas from a (9) ……………….. ……………….. to become new products, new services, better
ways of doing things, will make economic growth happen in the future.

CÙNG BELL QUA MÔN TIẾNG ANH 8