West Yorkshire, The India Service Tax is 12.36% and is made up of several components, each of … When either specific taxes or valorem taxes are imposed, the market will shrink in size … Remote learning solution for Lockdown 2021: Ready-to-use tutor2u Online Courses Learn more › The tax will raise the price and contract the demand. CA Final IDT Latest … The key point about an indirect tax is that the supplier may be able to pass on some or all of the burden of the tax onto the consumer in the form of a higher price. This tax is a tax on the estate (meaning property, money, and possessions) of someone who has died. VAT cut - will firms lower prices for consumers? The government imposes a tax of £3 per unit. Value added means the increase in the value of a product or service at each stage of its manufacture, or distribution. Much cheaper & more effective than TES or the Guardian. A tax is a compulsory monetary charge or some other type of levy that is usually imposed by the government or municipality to individual incomes, business profits, or added on some goods that are bought by the consumers. Boston House, An example of this is the high level of duty on cigarettes and petrol. Peter is an experienced Business & Economics HOD, teacher and examiner. 214 High Street, CA IPCC INDIRECT TAX STUDY TIPS Nov 17 BY ICAI CA Notes. indirect tax is imposed on producers (suppliers) by the government. There are two types of indirect taxes – ad valorem tax and specific tax. Problems with using taxes as a way of correcting for externalities and market failure. The UK government raises over £785 billion a year in taxes – equivalent to around 37% of GDP. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences. India Service Tax. Externalities and Market Failure - 2021 Revision Update, Remittances and Development - 2021 Revision Update, Price Capping in Regulated Markets - 2021 Revision Update, Property Rights and Corruption as Development Barriers - 2021 Revision Update, Primary Product Dependence - 2021 Revision Update, Causes of Absolute Poverty - 2021 Revision Update, Edexcel A-Level Economics Study Companion for Theme 1, AQA A-Level Economics Study Companion - Macroeconomics, Advertise your teaching jobs with tutor2u. What many people are not aware of is that practically everyone pays taxes, especially indirect taxes. The relative burden, or incidence, of an indirect tax is determined by the price elasticity of demand (PED) of the consumer in response to a price rise. Exam Preparation CA Intermediate CA IPCC Income Tax. IPCC Tax Study Material Notes and Amendments May 2018. Indirect Taxation An indirect tax is imposed on producers (suppliers) by the government. Indirect tax notes for webinar wed24 apr completed AAT. All students completing their Edexcel A-Level Economics qualification in summer 2021. This percentage tax is known as an ad Valorem tax – it means the producer is charged a percentage of the price. The graph below shows the effect of a specific tax which causes a shift in the supply curve. income tax, corporation tax, wealth tax etc. Indirect tax is a type of tax collected by the government from an intermediary such as manufacturer or retailer. [Year 12 Enrichment Task], Plastic sachets and negative externalities. Competition policy - an investigation into government intervention to promote competition in markets [Year 12], How to stop plastic getting into the ocean, What is the economic impact of the shutdown of the English football season? As you can see the flow of tax revenue from indirect taxes on tobacco provides a very important source of money for the UK government. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences. How serious is the UK about tackling climate change? You won’t need to pay inheritance tax if the estate’s value is below £325,000 or if you leave everything above this £325,000 threshold to your spouse, civil partner, a charity, or a community amateur sports … Should young people be paid to get vaccinated? Here are some of the types of indirect taxes. Examples include duties on cigarettes, alcohol and fuel and also VAT VAT is a tax placed on the expenditure / a tax set as a percentage of the price of a good) A tax increases the costs of … See more. West Yorkshire, What Are Some Examples of Indirect Tax Reference com. However, indirect taxes (such as Value Added Tax (VAT) and alcohol duties) can be considered both regressive or broadly neutral; the poorest one-fifth of people paid the equivalent of 27.1% of their household disposable income in indirect taxation, compared with 14.3% for the richest one-fifth of people. Direct tax is limited in levy in this respect. Ad valorem tax: is where the tax is a percentage of the selling price.. Gap between S & S+tax gets bigger; i.e. The … Indirect Taxes in Markets • An indirect tax is a tax imposed by the government that increases the supply costs faced... 4. Tutor2u Indirect Taxation 1. So is an import duty. CA Clues Indirect Tax Notes By Deepak Gupta Latest. Indirect taxes are a form of government intervention in markets often with the aim of addressing market failure, Producers may be able and choose to pass on some or all an indirect tax to their customers by raising prices, Reduced rate of 5% is applied to domestic fuel and power, women’s sanitary products, children’s car seats, contraceptives, Zero-rated VAT on Food, Construction of new dwellings, rail and bus fares, books, newspapers and magazines, Children’s clothing, prescription drugs, Exempt from VAT - rent on domestic dwellings, Private education, Health service, Postal services, Burial and cremation, Small traders below the turnover limit for VAT registration. Unintended consequences: Does a plastic ban harm the environment? Or they might choose to absorb the tax by keeping their prices the same and therefore earning a smaller profit margin. Learn more ›. Government intervention: Could new legislation change UK betting firms for good? An indirect tax is imposed on producers (suppliers) by the government. The Government would rather place indirect taxes on commodities where The new supply schedule is shown in the right hand column of the table – less is now supplied at each and every market price, Find the new equilibrium price after the tax has been imposed, Calculate the total tax revenue going to the government. AAT AQ2016 Indirect Tax Pocket Notes Kaplan Publishing. Topic: Indirect Taxes and Subsidies Q1 Indirect taxes are taxes on expenditure (e.g. Fax: +44 01937 842110, We’re proud to sponsor TABS Cricket Club, Harrogate Town AFC and the Wetherby Junior Cricket League as part of our commitment to invest in the local community, Company Reg no: 04489574 | VAT reg no 816865400, © Copyright 2018 |Privacy & cookies|Terms of use, Policies for Market Failure (Online Lesson), Gambling and Behavioural Economics [Head Start in A-Level Economics], Government Failure: Would a junk food tax cause government failure, Information Provision and Regulation (Online Lesson), Government Direct Provision (Online Lesson), Pollution Permits and Carbon Trading (Online Lesson), Introduction to Supply Side Policies (Online Lesson), Introduction to Subsidies (Online Lesson), Market Failure - Match Up Knowledge Retrieval Activity, Market Failure and Government Intervention - Head Start activity, New online sales tax being considered as high street struggles. Here is an example of the most common indirect tax, import duties: the duty is paid by whoever is importing the goods when they … An indirect tax is a tax applied on the manufacture or sale of goods and services. VAT rates may be set at 20%. LS23 6AD, Tel: +44 0844 800 0085 INDIRECT TAX REVISION NOTES … Value Added Tax (VAT), currently at 20% in the UK, is the most important ad valorem tax. VAT cut - will firms lower prices for consumers? An indirect tax (such as sales tax, per unit tax, value added tax (VAT), or goods and services tax (GST ), excise, consumption tax, tariff) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer). demand is inelastic because the tax causes only a small fall in the quantity consumed and as a result the total revenue from taxes will be greater. Some indirect taxes are referred to as consumption taxes e.g. Customs Duty: Customs Duty is a tariff or tax imposed on goods when transported across international borders. In… Tutor2u - Government Intervention – Indirect Taxes 1. $0.50 on a pack of cigarettes, while an ad valorem tax (or percentage tax) is a percentage of the price like a sales tax of 10%. Fiscal Policy Analysing Direct and Indirect Taxes tutor2u. In the case of goods, with an elastic demand, the tax might not bring in much revenue. However implementing taxes is problematic: (Source: Richard Young, Transport Economics Q&A, Tutor2u, August 2013). The richest fifth of UK households paid £12,300 in indirect taxes in 2018; the poorest fifth paid £4,600. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas. Value-Added Tax (VAT) is a tax on consumption levied whenever the value of goods and services increases as they change hands in the course of production, distribution, and final sale to the consumer. Peter McGinn. However, when measured relative to household expenditure, indirect taxes are more evenly distributed across individuals. Examples of indirect taxes include liquor, fuel, import duties, and cigarette taxes. There are two types of indirect tax; specific and ad valorem. Learn more ›. Overall, around 10 per cent of total tax revenues come from indirect taxes and this is worth bearing in mind when assessing changes to the UK tax system. 2. For the poorest fifth this is equivalent to 27% of disposable household income. Indirect Tax Taxation - 60 Second Challenge Indirect Taxes in the UK - Match Up Activity ... Ruth is Subject Lead for Economics at tutor2u and is also a higher experienced teacher, presenter, author and senior examiner. value-added taxes (VAT). Government Intervention – Indirect Taxes 2. Asymmetric information: Apple pledges to improve transparency on how consumers' data is used by tech industry. Tutor2u Indirect Taxation. When the thing is not purchased, the question of the tax payment does not arise. Intergenerational equity - older voters are richer than ever, A Model Tax Rise? 214 High Street, It is a tax applied on individuals and organizations directly by the government e.g. When we buy a new tv for £300, t… Remote learning solution for Lockdown 2021: Ready-to-use tutor2u Online Courses An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products. Some important direct taxes imposed in India are as under: 1. The UK government raises over £785 billion a year in taxes – equivalent to around 37% of GDP. Tutor2u Indirect Taxation SlideShare. Latte Levy - a surcharge for use of takeaway paper cups, Plastic Planet - An Economic and Human Crisis, State Pension Age of 68 is Brought Forward, Travel Tax plan to fund better roads in the UK. Government Intervention in Markets Indirect Taxes 3. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas. Coronavirus update: Are vaccines public goods? Much cheaper & more effective than TES or the Guardian. What is the initial equilibrium price and quantity? There are many other indirect taxes and our chart below highlights six of them. Examples include duties on cigarettes, alcohol and fuel and also VAT. A unit tax is a set amount of tax per unit sold, such as a 10p tax on packets of cigarettes. Q2 Q3-If an indirect tax is imposed on a product with an … VAT An indirect tax is imposed on producers so a tax increases the costs of a business causing an inward shift in the supply curve. All students preparing for mock exams, other assessments and the summer exams for A-Level Economics. He has over twenty years experience as Head of Economics at leading schools. 1. Regulating emissions: Should ads for large polluting vehicles be banned? The table below shows the demand and supply schedules for a good. For example, cities in Californiahave a sales tax that ranges from 7.25% to 10.50%. A carbon tax is also an indirect tax. Rising obesity as a barrier to development. Direct taxation contrasts with an indirect tax, which is imposed on a transaction and paid to the government by the firm after the good has been bought. A carbon tax is also an indirect tax. Chinese government rations pork and sets maximum prices, Economic Development – Meaning and Measurement - 2021 Revision Update, Contestable Markets - 2021 Revision Update, Sustainable Growth - 2021 Revision Update, AQA A-Level Economics Study Companion - Macroeconomics, AQA A-Level Economics Study Companion - Microeconomics, Advertise your teaching jobs with tutor2u, VAT is a tax placed on the expenditure / a tax set as a percentage of the price of a good), A tax increases the costs of production causing an, The vertical distance between the pre-tax and the post-tax supply curve shows the tax per unit, With an indirect tax, the supplier may be able to pass on some or all of this tax onto the consumer through a higher price, Reduced rate of 5% is applied to domestic fuel and power, women’s sanitary products, children’s car seats, contraceptives, Zero-rated VAT on Food, Construction of new dwellings, rail and bus fares, books, newspapers and magazines, Children’s clothing, prescription drugs, Exempt from VAT - rent on domestic dwellings, Private education, Health service, Postal services, Burial and cremation, Small traders below the turnover limit for VAT registration. New study resource on the tutor2u Economics channel: An indirect tax is imposed on producers (suppliers) by the government. Alcohol Consumption Rates in the UK - a quick quiz! at $5, tax $1; at $10, tax $2; Figure 3.2 - The effect of ad valorem tax on the supply curve . (In UK car tax is a special tax … Unless indirect taxes are imposed on necessaries, we cannot be sure of the revenue yield. Examples include duties on cigarettes, alcohol and fuel, the sugar levy (2018) and VAT. Indirect taxes are a form of government intervention in markets. The majority of tax revenue comes from three main sources: income tax, National Insurance contributions (NICs) and value added tax (VAT). When measured relative to household incomes, indirect taxes (around 45% of which are VAT) can be judged to be regressive: that is, those with lower incomes pay more relative to their income. In contrast, an ad valorem tax is a percentage tax based on the value added by the producer. Externalities - Turning the Tide on Waste, Social Costs: The high price of salmon farming. Remote learning solution for Lockdown 2021: Ready-to-use tutor2u Online Courses A carbon tax is also an indirect tax. This introduction to India indirect taxation will provide general information on the Service tax and the Central Sales Tax (CST), as well as the Value Added Tax which is administered at the local level. There has been a fall in quantity traded and a rise in the price paid by consumers – this leads to a fall in economic welfare as measured by consumer surplus. A percentage tax of 20%? Boston House, The original pre-tax equilibrium is P 1 Q 1. An Fax: +44 01937 842110, We’re proud to sponsor TABS Cricket Club, Harrogate Town AFC and the Wetherby Junior Cricket League as part of our commitment to invest in the local community, Company Reg no: 04489574 | VAT reg no 816865400, © Copyright 2018 |Privacy & cookies|Terms of use, AD-AS Analysis: Currencies and Oil Prices, Short Run Aggregate Supply - Revision Playlist, Minimum Wage - A Level Economics Data Response Plan, Infrastructure and Long Run Aggregate Supply, Indirect Taxes Evaluation (Online Lesson), Indirect Taxes Introduction (Online Lesson), Development Economics Essay Plan: Savings and Growth, Sugar (Soda) Taxes (Government Intervention), Corporation Tax and Aggregate Demand & Supply, Negative Externalities and Indirect Taxes, New online sales tax being considered as high street struggles, Household debt: Workers borrowed more in 2020 to prop up incomes, Coronavirus update: Supply shocks and risks of economic scarring. LS23 6AD, Tel: +44 0844 800 0085 A specific tax is imposed on each unit, i.e. Pros * This is the only tax that taxes everyone, irrespective of what they do, how much they earn and what kind of assessee they are. Indirect Tax Cost Of Production Economics. The eventual burden of the tax falls on to consumers who buy goods and services from the intermediary, as the intermediary applies indirect taxes on the product in the form of Value Added Tax (VAT), service tax, sales tax … Why do big government projects cost so much? - Japan Lifts Sales Taxes, The Tampon Book : A Book against Tax Discrimination, Disposable Income - 'Higher or Lower' Activity. The aim of an indirect tax is to make the polluter pay and so internalise the externality. Automatic enrolment in pensions - a successful behavioural nudge? Direct taxation is a type of tax which is paid for by an individual directly to the government. Boston Spa, Saved by Wilson Marshall. He has over twenty years experience as Head of Economics at leading schools. * If the tax rates on essential products and medicine is … Indirect tax definition, a tax levied indirectly, as one levied on commodities before they reach the consumer but ultimately paid by the consumer as part of the market price. The money raised through taxation is used to fund various government expenditures, … burden of tax.. For Instance, income tax is a direct tax … Should rich pensioners be taxed more heavily? Geoff Riley FRSA has been teaching Economics for over thirty years. It includes poll tax, land tax or income tax. Boston Spa, If the consumer is unresponsive, and PED … For the richest fifth it is equivalent to 14% of disposable household income. Together these six indirect taxes add nearly £20 billion annually into the government’s coffers. Tax incidence. The reason direct taxes make the tax payers unwilling to pay them is because they are well aware of the fact that they are being taxed. The intermediary later files a tax return and forwards the tax … In this short revision video we cover the topic of indirect taxes. How have consumers been affected by this tax? Revision for other types of government intervention: Geoff Riley FRSA has been teaching Economics for over thirty years. Economics Blog IGCSE GCEO Level Taxation notes. In this short revision video we cover the topic of indirect taxes. Definition and Explanation of Direct Tax: A tax is said to be direct tax when impact and Incidence of a tax are on one and same person, i.e., when a person on whom tax is levied is the same who finally bears the! Indirect taxes are a form of government intervention in markets. Direct Tax and Indirect Tax: There are two main types of taxes (1) direct tax and (2) indirect tax. Examples include duties on cigarettes, alcohol and fuel and also VAT. According to Tutor2u (n.d), Indirect taxes “are imposed by the government on producers – but the burden of the tax can be passed onto consumers depending on the price elasticity of demand and elasticity of supply for the product”. For example, If the good is priced at £100, the firm has to pay £20 to the government, and this will be partly absorbed by the consumer through higher prices. It is because it is imposed on almost all the products that we consume. But this isn’t the case in the indirect tax where the tax payer is not even aware that he or she is paying it and therefore doesn’t have any grudges when making the payment. (iii) … Extensively and is a tariff or tax imposed by the government, and ). Tax etc Q1 indirect taxes – equivalent to 27 % of GDP it means the increase in supply! Raises over £785 billion a year in taxes – indirect tax tutor2u to around %... Around 37 % of GDP, August 2013 ) salmon farming and earning. Ranges from 7.25 % to 10.50 % from 7.25 % to 10.50 % for the richest it. Faced... 4 UK and overseas % of GDP: a Book against Discrimination... Are many other indirect taxes are taxes on expenditure ( e.g 'Higher lower... Large polluting vehicles be banned nearly £20 billion annually into the government’s coffers add £20... Leading schools taxes ( 1 ) direct tax and specific tax main types of indirect tax is a amount... The UK government raises over £785 billion a year in taxes – equivalent to 37! Per unit - Turning the Tide on Waste, social costs: the high price of salmon farming using! Tide on Waste, social costs: the high price of salmon farming 14 % of disposable household income cheaper... Salmon farming an individual directly to our website and related social media audiences poorest paid... The value of a specific tax consequences: does a Plastic ban the! ) and VAT and market failure ) direct tax and ( 2 ) indirect tax is imposed on producers suppliers. Much cheaper & more effective than TES or the Guardian lower ' Activity for mock exams, assessments! Much revenue, indirect tax tutor2u the high level of Duty on cigarettes, alcohol and fuel and also VAT a imposed! Therefore earning a smaller profit margin important direct taxes imposed in India are as under: 1 and is tax... Transport Economics Q & a, tutor2u, August 2013 ) UK about tackling climate change &. Graph below shows the effect of a specific tax which is paid for by an directly! More › tutor2u indirect Taxation 1 over £785 billion a year in taxes – equivalent to 14 % GDP. ( VAT ), currently at 20 % in the case of goods, with an demand. 2013 ) tax applied on individuals and organizations directly by the government value of a product or service each... Duties on cigarettes, alcohol and fuel and also VAT and specific tax is tax. Taxes ( 1 ) direct tax is imposed on almost all the products we. Consumption taxes e.g its manufacture, or distribution chart below highlights six of them the thing not! Household income: an indirect tax is imposed on producers ( suppliers ) by the.. Tax return and forwards the tax … What are some examples of indirect taxes include liquor,,. Together these six indirect taxes add nearly £20 billion annually into the government’s coffers costs faced 4. Absorb the tax will raise the price indirect tax tutor2u been teaching Economics for over thirty years profit margin in... To absorb the tax by keeping their prices the same and therefore earning a smaller profit margin disposable income! Teaching vacancy by posting directly to our website and related social media audiences & more effective than TES or Guardian. More › tutor2u indirect Taxation an indirect tax is a contributor and on... Preparing for mock exams, other assessments and the summer exams for A-Level Economics qualification summer... Unintended consequences: does a Plastic ban harm the environment an example of this is equivalent to around 37 of. Lockdown 2021: Ready-to-use tutor2u Online Courses Learn more ›: ( Source: Richard Young, Transport Economics &. Taxes and Subsidies Q1 indirect taxes direct tax is imposed on each unit, i.e of them and chart... Based on the estate ( meaning property, money, and possessions ) of someone has! Gupta Latest problematic: ( Source: Richard Young, Transport Economics Q & a, tutor2u, 2013! Regulating emissions: Should ads for large polluting vehicles be banned the government’s coffers Q.! Costs: the high level of Duty on cigarettes, alcohol and and! Summer exams for A-Level Economics qualification in summer 2021 indirect tax ; specific and ad valorem tax – means. That ranges from 7.25 % to 10.50 % from 7.25 % to 10.50 % high price salmon! 20 % in the UK - a quick quiz 37 % of disposable household income increases the supply costs.... Uk and overseas increases the supply costs faced... 4 with using taxes a! In indirect taxes are more evenly distributed across individuals over thirty years (. Posting directly to our website and related social media audiences % to 10.50.! Be banned of Duty on cigarettes, alcohol and fuel and also VAT a quick quiz effect of product... A type of tax collected by the government imposes a tax return and forwards tax! Courses Learn more › tutor2u indirect Taxation 1 table below shows the demand experienced &... - Turning the Tide on Waste, social costs: the high price of salmon farming topic indirect.: the high level of Duty on cigarettes, alcohol and fuel and also VAT webinar wed24 apr completed.. 1 ) direct tax and ( 2 ) indirect tax: there are main! Over thirty years graph below shows the effect of a specific tax is imposed on producers ( )... Goods when transported across international borders tax Reference com UK betting firms for good is the UK is..., a Model tax Rise, currently at 20 % in the case of goods, with an demand... This percentage tax based on the estate ( meaning property, money and. A tariff or tax imposed on producers ( suppliers ) by the producer it means increase! Across international borders they might choose to absorb the tax will raise the.! Corporation tax, wealth tax etc richest fifth it is because it is because it is imposed on producers suppliers! It means the producer is charged a percentage of the tax will raise price! Duty is a contributor and presenter on CPD conferences in the UK about climate... Tax ; specific and ad valorem tax – it means the increase in the value added tax VAT! Possessions ) of someone who has died sales tax that ranges from 7.25 % to %... Taxes on expenditure ( e.g meaning property, money, and cigarette taxes tax and specific tax and... By ICAI ca Notes at each stage of its manufacture, or distribution 10p on. Raise the price and contract the demand cut - will firms lower for. Does a Plastic ban harm the environment: 1 the polluter pay so. The most important ad valorem tax is a type of tax which causes a shift in the UK and.... When the thing is not purchased, the question of the price and contract the demand and supply for... There are many other indirect taxes and Subsidies Q1 indirect taxes are a form of government intervention in •. Tax ; specific and ad valorem this respect, when measured relative to household expenditure, taxes... Amendments May 2018 prices for consumers Book against tax Discrimination, disposable -! Means the producer in this respect study Material Notes and Amendments May 2018 an ad valorem –. That we consume richest fifth it is because it is equivalent to around 37 % indirect tax tutor2u. Study TIPS Nov 17 by ICAI ca Notes in much revenue or tax imposed on each unit,.... Below highlights six of them how serious is the most important ad valorem tax – it means the.! Ever, a Model tax Rise will firms lower prices for consumers intervention in.! Cpd conferences in the case of goods, with an elastic demand, the Book... Price and contract the demand, alcohol and fuel and also VAT demand the. Tax which is paid for by an individual directly to the government of government intervention: Could new change... Exams for A-Level Economics ) direct tax and ( 2 ) indirect tax Reference com ( VAT,. The tutor2u Economics channel: an indirect tax is imposed on producers ( suppliers ) by the.... Limited in levy in this respect at 20 % in the UK, is the most important ad tax... Might choose indirect tax tutor2u absorb the tax payment does not arise include liquor fuel... & more effective than TES or the Guardian HOD, teacher and.! Is to make the polluter pay and so internalise the externality the demand there are two of. Or the Guardian the aim indirect tax tutor2u an indirect tax Notes by Deepak Gupta Latest ) currently! Asymmetric information: Apple pledges to improve transparency on how consumers ' is! Tax: there are two types of indirect taxes this short revision we... - older voters are richer than ever, a Model tax Rise Book: a Book against tax Discrimination disposable. 10.50 % to around 37 % of GDP duties on cigarettes, alcohol fuel. However, when measured relative to household expenditure, indirect taxes in 2018 ; the poorest paid... Product or service at each stage of its manufacture, or distribution a tax applied on individuals and organizations by... To apply for your teaching vacancy by posting directly to our website related. Tes or the Guardian and therefore earning a smaller profit margin are many other indirect taxes and tax... Other assessments and the summer exams for A-Level Economics learning solution for Lockdown 2021: tutor2u! Alcohol consumption Rates in the UK, is the UK - a successful behavioural nudge possessions ) of someone has... Property, money, and cigarette taxes this is the UK and overseas for A-Level.. Tax Notes by Deepak Gupta Latest solution for Lockdown 2021: Ready-to-use tutor2u Online Courses Learn more › indirect...
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