Taxes

One of the ways of government intervention into free market mechanism is taxation. Government introduces a wide range of taxes in order to allocate tax revenue to various forms of government spending such as education, health, defense. Also government might consider to spend money from tax revenue onto buying capital goods which will generate greater benefits in the future. 
There are two main types of taxes: direct and indirect. Direct tax is a tax which levies on individual’s income. This tax people cannot avoid and paid by everyone who is employed. Income tax can be regressive or progressive. In Uk’s case it is progressive which means that it takes higher percentage from the income of the rich; in other words, as your income rises, percentage of tax will go up. However there are bands exist, that is when your income is higher than a certain amount of money, percentage of tax will not increase anymore and will remain the same. 
Indirect taxes that are taxes levied on goods and services are regressive. This means that tax will take a greater percentage from the income of the poor. Indirect taxes are widely used to discourage people from buying demerit goods or other goods and services that produce negative externalities. 
Indirect tax imposed on sales of goods and services generally is called Value Added Tax. Excise taxes are imposed on specific products producing negative externalities. They are usually take a big proportion in order to decrease demand for them. Corporation tax is levied on corporate profits; inheritance taxes are taxes on transfers of wealth above the certain amount; in the UK there is also Council Tax that is a form of taxation paid by residents to local councils in Egland, Scotland and Wales.