The country of Changeland has, for many years, operated as a military dictatorsh

Question

The country of Changeland has, for many years, operated as a military dictatorship. Last year, however, a people's revolution brought a democratic election for the first time in living memory. The newly elected Government has pledged to improve housing, healthcare and levels of education. It has also promised a 'fair' system of taxation which should be quite a contrast fromthe corrupt means of raising revenue that had previously operated under the military dictatorship.
Since the revolution, Changeland has benefited from some inward investment from other countries. Several large multinational companies have also begun to import into Changeland for the first time in many years and have engaged in some aggressive marketing of their productswith expensive advertising campaigns, promotional pricing and targeting of young people. The Government is pleased by the economic benefit of this activity but is worried by excess consumption and the purchase of certain goods it sees as undesirable. The Government does not want to ban the sale and consumption of these goods but does want to curb consumption. The Government is also concerned by a lack of corporate social responsibility amongst certain companies.
As the Government is very inexperienced, it has established a policy direction team to advise it on a number of issues including devising an appropriate taxation policy and formulating ways of discouraging undesirable consumption without banning some product sales. You serve as a member of that team, having been seconded from a similar position in another country that is friendly towards Changeland.
Explain the key policy decisions to be made and the main options available to the new Government when establishing a suitable tax regime in Changeland.

Explanation / Answer

When establishing a suitable tax regime there is, in the first place, a need to decide upon certain broad policy decisions.
Overall tax requirement
Fiscal policy relates to the level of taxation and spending that a government decides upon. What is known from the scenario is that Changeland

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