U22 HANDOUT E4BS Lecturer: Nguyen Thao Trang

UNIT 22: GOVERNMENT AND TAXATION (HANDOUT)

AIMS
 Consider the role of government intervention in the economy.
 Discuss government spending and taxation.
government /ˈɡʌv.ɚn.mənt/ (n): the group of people who officially control a country.
intervention /ˌɪn.t̬ɚˈven.ʃən/ (n): the action of becoming intentionally involved in a difficult
situation, in order to improve it or prevent it from getting worse.
spending /ˈspen.dɪŋ/ (n): the money that is used for a particular purpose, especially by a
government or organization.

LEAD-IN
Q1. Some people argue that too much regulation is bad for business and that governments
interfere with ‘market force’.
interfere /ˌɪn·tərˈfɪər/ (v): to involve yourself in a situation when your involvement is not wanted
or is not helpful.
market force: (~market dynamics): are forces that will impact prices and the behaviors of
producers and consumers. In a market, these forces create pricing signals which result from the
fluctuation of supply and demand for a given product or service.
Suggestion: right-wing and left-wing political views
Left-wing views people still generally believe that the government has an essential role to play
in ensuring the provision of services such as education, healthcare, social security, public
transport, and housing, regulating working conditions, health, and standards.
Right-wing views people argue that many activities can be left to private enterprise and the
market system. The role of government should be restricted to activities such as defense, the
police, and the justice system. They argue that too much regulation is bad for business and leads
to inefficiency and unemployment.
Your answer:
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U22 HANDOUT E4BS Lecturer: Nguyen Thao Trang

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Q2. 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?
undertake /ˌʌndəˈteɪk/ (v): to do or begin to do something, especially something that will take a
long time or be difficult.
regulate /ˈreɡ·jəˌleɪt/ (v): to control an activity or process by rules or a system.
Your answer:
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READING: THE ROLE OF GOVERNMENT

central economic planning /
centrally planned economy
impose (v)
impose on sth
dispose on sth (phrasal verb)
on sb’s behalf / on behalf of
sb
prescribe (v)

ailment (n)

in accordance with a rule,

law, wish,etc.
resort to sth (phrasal verb)
resort to force
coerce (v)

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U22 HANDOUT E4BS Lecturer: Nguyen Thao Trang

scratch the surface

proposition

inter- (prefix)
interdependent (a)

DISCUSSION
Q1. How would you characterize the Friedman’s politics?
characterize (v): to have as a typical quality.
Your answer:
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Q2. How far do you agree with them, concerning any of the specific examples they give of
government legislation?
legislation /ˌledʒ.əˈsleɪ.ʃən/ (n): a law or set of laws suggested by a government and made
official by a parliament.
Your answer:
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LISTENING: GOVERNMENT INTERVENTION

Listen to Michael Kitson talking about the role of government and answer the following
questions.
Is he in favor of government intervention?
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Q1. Tapescript

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U22 HANDOUT E4BS Lecturer: Nguyen Thao Trang

… The second effect is whether we think unfettered (1) .................... .................... alone can
ensure the long-term (2) .................... allocation of resources and long-term
(3) .................... ..................... 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
(4) .................... .................... or the fact that markers are not working properly.
Let’s just think of some of the areas where governments should want to (5) .................... They
may want to spend, spend money on education, it’s very important,
(6) .................... ..................... People may not invest enough in their education if they have to
pay for it themselves, and many people wouldn’t be able to (7) .................... the resources,
wouldn’t be able to (8) ........................................, OK, so it’s the importance of education.
Similar things apply to health, we may not actually buy enough if we are left to buy it ourselves.
Let’s think about developing new (9) .................... and (10) .................... Developing new
products and technologies is highly (11) .................... and highly (12) .................... and highly
(13) .................... ...................., but possibly very big outcomes for the economy as a whole. So,
it makes ... it’s understandable that firms do not invest in very (14) ........................................
technologies, OK, and ... because it may be very expensive for them, there’s a good chance they
won’t (15) ...................., and if they do succeed, somebody else will be able to copy and
(16) .................... and benefits from their effects.
These are positive (17) .................... .................... of government intervention. If the government
helps to (18) .................... 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 economic growth. I think it’s
mainly in terms of the areas of education, particularly, again in the areas of (19) .................... and
.................... and ...................., and increasingly in helping develop science, and helping
commercialize science, and bringing those ideas, which you know, ideas ultimately drive
(20) .................... economic growth, and encouraging those ideas, from a science base to become
new products, new services, better ways of doing things, will make economic growth happen in
the future.

Q2. What reasons does Michael Kitson give for government spending on education and
health?

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U22 HANDOUT E4BS Lecturer: Nguyen Thao Trang

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Q3. Why don’t firms invest in very early-stage technologies?
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Q4. What other areas or activities does Kitson mention?
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Discussion: How far do you agree with Kitson about these various forms of spending?
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VOCABULARY
1. ………………………………
o Income tax is used to fund ……………………………………., pay
……………………………………., and provide …………………………………….
o ……………………………………. is a type of income tax that is levied on an individual's
………………, ……………… and other ………………………………
o ……………………………… apply to corporations, partnerships, small businesses, and
people who are self-employed.
2. ………………………………
o A direct tax is paid by an ……………… or ……………… to the entity that levied the tax.
o Direct taxes include income ………………, ……………… and
………………………………
3. ………………………………
4. ………………………………
An indirect tax is collected by one entity in the ………………………… (usually a producer or
retailer) and paid to the ………………, but it is passed on to the ……………… as part of the
purchase price of a good or service.

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U22 HANDOUT E4BS Lecturer: Nguyen Thao Trang

5. ………………………………
o Value-added tax, or VAT, is added to a product at every point on the supply chain where
……………………………….
o ……………… of VATs claim that they raise …………………………… without punishing
the wealthy by charging them more through an income tax.
o ……………… say that VATs place an ………………………………on lower-income
taxpayers.
6. ………………………………
o Capital gains taxes are due only ……………………………………………………
o Capital gains taxes apply only to ……………………… which include stocks, bonds,
jewelry, coin collections, and real estate.
7. ………………………………
o An inheritance tax is levied on the value of the …………… received by the
………………………, and it is the beneficiary who pays it.
8. ………………………………
o A wealth tax is a tax levied on the ………………………………of a taxpayer’s assets.
9. ……………………………..
10. ……………………………..
11. …………………………….
12. ……………………………
o A loophole is basically a technicality that allows one to
……………………………………………… through some activity.
13. Common loopholes are found in ………………………………………………

DISCUSSION: TAXATION 2
Q1. Which of the taxes mentioned above do you have in your country?
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Q2. Is there a flat rate of income tax (the same for everybody) or is it progressive? Which system
do you prefer?

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U22 HANDOUT E4BS Lecturer: Nguyen Thao Trang

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Q3. Do you prefer direct or indirect tax?
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