Vocabulary:

mortgagee A mortgagee is a company which lends money to buy a house.

mortgagor A mortgagor is an individual or a legal entity who borrow money to buy a house or flat.

lending long Lending long means granting long-term loans.

borrowing short Borrowing short means having short-term debts.

a building society Building societies specialize in granting long-term loans for buying homes.

monthly repayments Paying back every month.

title deed A title deed is a document which shows the legal ownership of the house.

fixed interest With the fixed interest mortgage the borrower / mortgagor

mortgage knows exactly how much money he / she has to find each month throughout the term of the mortgage.

variable interest With the variable interest mortgage the mortgagor pays

mortgage different amounts of money depending on the variations in the interest rates.

deregulation Deregulation is the removal of government controls on business.

Exercise 5: Complete each blank space with the appropriate word or words.

1. I haven't got enough in my ________ to cover a down-payment on a car.

2. In general, buying a house __________ you against inflation.

3. What's the total area of the _________ you want to buy?

4. The CMA are always very _________, so we'll estimate the value of the property at £ 10,000.

5. How would you _________ the loan to the bank?

6. We'll have to ask our architect to take a ___________ at the house.

7. The monthly cost of such an ____________ would be enormous.

8. Is this the department that _______________ short-term loans?

9. Have you got any __________ or shares that we could use as collat­eral?

10. I haven't had the property ________ yet, so I can't even give you __________ estimate of its value.

Unit 12: taxes and public spending

Text 1: Read and translate the text:

Taxes and public spending

In most economies government revenues come mainly from direct taxes on personal incomes and company profits as well as indirect taxes levied on purchase of goods and services such as value added tax (VAT) and sales tax. Since state provision of retirement pensions is included in government ex­penditure, pension contributions to state-run social security funds are included in revenue, too. Some small component of government spending is financed through government borrowing.

Government spending comprises spending on goods and services and trans­fer payments.

Governments mostly pay for public goods, that is, those goods that, even if they are consumed by one person, can still be consumed by other people. Clean air, national defense, health service are examples of public goods. Governments also provide such services as police, fire-fighting and the ad­ministration of justice.

A transfer is a payment, usually by the government, for which no cor­responding service is provided in return. Examples are social security, re­tirement pensions, unemployment benefits and, in some countries, food stamps.

In most countries there are campaigns for cutting government spending. The reason for it is that high levels of government spending are believed to exhaust resources that can be used productively in the private sector. Lower incentives to work are also believed to result from social security payments and unemployment benefits.

Whereas spending on goods and services directly exhausts resources that can be used elsewhere, transfer payments do not reduce society's resources. They transfer purchasing power from one group of consumers, those paying taxes, to another group of consumers, those receiving transfer payments and subsidies.

Another reason for reducing government spending is to make room for tax cuts.

Government intervention manifests itself in tax policy which is different in different countries. In the United Kingdom the government takes nearly 40 percent of national income in taxes. Some governments take a larger share, others a smaller share.

The most widely used progressive tax structure is the one in which the average tax rate rises with a person's income level. As a result of progressive tax and transfer system most is taken from the rich and most is given to the poor.

Rising tax rates initially increase tax revenue but eventually result in such large falls in the equilibrium quantity of the taxed commodity or activity that revenue starts to fall again. High tax rates are said to reduce the incentive to work. If half of all we earn goes to the government, we may prefer to work fewer hours a week and spend more time in the garden or watching television.

Cuts in tax rates will usually reduce the deadweight tax burden and re­duce the amount of taxes raised but might increase eventual revenue.

If governments wish to reduce the deadweight tax burden and balance spending and revenue, they are supposed to reduce government spending in order to cut taxes.