Laffer curve and possible differences in the incentive to work for different income groups complicate the task of estimation. The structure of the curve may also be changed by policy decisions. For example, if tax loopholes and tax shelters are made more readily available by legislation, the point at which revenue begins to decrease with increased taxation is likely to become lower. Laffer presented the curve as a pedagogical device to show that in some circumstances, a reduction in tax rates will actually increase government revenue and not need to be offset by decreased government spending or increased borrowing. For a reduction
Notional profit Notional profit Notional Profit A contract usually takes several years to get itself completed. If the profit on such contracts is recorded only after their completion, then wide fluctuations may be noted in the profit figures of contractors from year to year. To avoid these fluctuations in the reported profits and to reflect the revenue in the accounting period during which the activity is undertaken, the profit in respect of each contract in progress is transferred to the profit and loss account of the year by calculating the notional profit. The portion of notional profit to be transferred to the