The largest source of revenue for the government is the income tax and this will then be levied against interest, dividends, capital gains and income. Therefore, the highest earners will then be paying high taxes. However, if there is an increase in tax then this will affect consumer spending in different ways including which will then be affecting the aggregate demand. Increase in tax reduces consumer spending. When the taxes have been placed on specific products, then the consumers will tend to look for substitutes that are available at cheap prices. This has implications for Tesco as they may have to reduce the prices of their products to compete with other competitors such as ASDA and LIDL. This also impacts Tesco as a smaller price being charged means profits aren’t as high as the firm would wish for them to be. It is imperative to note that consumer spending is often two thirds of GDP. Therefore, the increasing taxes will then be reducing the disposable income. This will then mean that the consumers will only spend the money they have on essentials and no additional amounts. With the tax increases, the consumer spending reduces and this will then cause fluctuations in the economy because of the attitudes of clients or consumers towards the state of economy. This also has implications for Tesco who may have to compete in an economy which is struggling and so they will struggle too with imports and daily running of their stores.The UKs largest supermarkets are being hit with increasingly disproportionate hikes in business rates that will spell more pain for them in times of recovering from an economic recession. Tesco, Sainsbury’s, ASDA and Morrison’s face an additional bill of more than £110,000 per superstore in 2015-16 compared with 2010-11. This occurs at a time when small businesses have seen their bills reduced. This increase of rates for only the bigger supermarkets is seen as unfair and has many implications for Tesco. Changes in this policy impact Tesco as increasing their rates is an increase to their expenses and takes away capital which can be used to expand and which eats up the company’s profits. It may also impact Tesco as they have to increase their price of goods and services to cope with these increased business rates and so consumers stop shopping with them and go to other smaller stores who don’t have to increase their prices to cope with an increase in business rates.