Taxes (from Latin taxo ) are compulsory financial costs or some other type of levy imposed on taxpayers (individuals or other legal entities) by governmental organizations in to fund expenses public. Failure to pay, along with avoidance or rejection of taxation, may be punishable by law. Taxes consist of direct or indirect taxes and may be paid in the form of money or labor equivalent.
Most countries have a tax system to pay for the public/public/mutually agreed needs and functions of the government: some levies are a fixed percentage rate of tax on personal annual income, some on a scale based on the amount of annual income, and some countries impose virtually no equal tax once, or a very low tax rate for a particular taxing field. Some countries impose taxes on both corporate income and dividends; this is often referred to as double taxation as individual shareholders who receive this payment from the company shall also be taxed on such personal income.
Video Tax
Ikhtisar
The definition of law, and the definition of tax economy differ in some respects as economists do not consider much transfer to the government as taxes. For example, some transfers to the public sector are worth the price. Examples include, tuition fees at state universities, and fees for utilities provided by local governments. The government also obtains resources by "creating" money and coins (for example, by printing paper money and by printing coins), through voluntary prizes (eg, donations to universities and public museums), by applying penalties (such as traffic fines), by borrow, and also by seizing wealth. From an economist's perspective, taxes are the transfer of non-coercive resources, but mandatory from the private sector to the public sector, levied on the basis of predetermined criteria and without reference to certain benefits received.
In the modern tax system, the government levies taxes in money; but in-kind taxes and corvà ©  © e are the characteristics of the traditional or pre-capitalist state and its functional equivalents. The methods of taxation and government spending on taxes raised are often highly debated in politics and economics. The collection of taxes is undertaken by government agencies such as the Ghana revenue authority, the Canadian Revenue Board, the Internal Revenue Service (IRS) in the United States, the Income and Customs (HMRC) in the UK or the Federal Tax Service in Russia. When taxes are not paid in full, the state may impose civil penalties (such as fines or fines) or criminal penalties (such as detention) on non-paying entities or individuals.
Maps Tax
Goals and effects
Taxation aims to increase revenue to fund regulate and/or change prices to influence demand. The state and its functional equations throughout history have used the money provided by taxation to perform many functions. Some of these include spending on economic infrastructure (roads, public transport, sanitation, legal systems, public safety, education, health care systems), military, scientific research, culture and art, public works, distribution, data collection and dissemination, public insurance , and the government's own operation. The government's ability to raise taxes is called its fiscal capacity.
When spending exceeds tax revenues, the government accumulates debt. Some taxes can be used to pay off past debt. The government also uses taxes to finance welfare and public services. These services may include education systems, pensions for the elderly, unemployment benefits, and public transportation. Energy, water, and waste management systems are also common utilities.
According to proponents of the chartalist theory of money creation, taxes are not required for government revenues, as long as the government concerned is able to spend fiat money. According to this view, the purpose of taxation is to maintain currency stability, express public policy on the distribution of wealth, subsidize certain industries or population groups or isolate certain benefit costs, such as roads or social security.
Effects can be divided into two basic categories:
- Taxes cause income effects because they reduce purchasing power to taxpayers.
- Taxes cause substitution effects when taxation causes substitution between tax and non-taxable goods.
If we consider, for example, two normal items, x and y, which each price p x and and the individual budget constraints given by the xp x yp y where Y is the revenue, the slope of the budget constraint, in the graph where both x are represented on the vertical axis and both y on the horizontal axis, equals - p y / p x . The initial equilibrium is at point (C), where the budget constraint and indifference curve intersect, introduces ad valorem tax at y either (budget constraints: p < y y ) , the slope of the budget limit becomes the same as - p y (1?)/. The new equilibrium is now at the tangent point (A) with a lower indifference curve.
As can be seen that the introduction of taxes causes two consequences:
- Changing the consumer's real income (less purchasing power)
- This raises the relative good price y .
The earnings effects show good variations of y of the quantity provided by changes in real income. Substitution effects show variations y are either determined by relative price variations. This type of taxation (which causes a substitution effect) can be considered a distortion.
Another example can be an Introduction to the income tax at once ( xp y yi y = Y - T), with parallel shifts downwards of the budget constraint, can generate higher revenues with the same loss of consumer utility as compared to the property tax case, from another point of view, the same income can be produced with lower utility sacrifices. The lower utility (with the same income) or lower income (with the same utility) provided by the tax of distortion is called excess pressure. The same result, accomplished by income tax at the same time, can be obtained by the following types of taxes (all of which only cause a shift in budgetary constraints without causing substitution effects), the slope of the budget limit remains the same (- p x / p y ):
- General consumption tax: (Budget limit: p x (1?) x p y (1?) y = Y)
- Proportional income tax: (Budget limit: xp y yp y = Y (1 - t ))
When and? tariffs are chosen to honor this equation (where t is the income tax rate and tau is the consumption tax rate):
the effects of both taxes are the same.
Taxes effectively change the relative price of the product. Therefore, most economists, notably neoclassical economists, argue that taxation creates market distortions and results in economic inefficiency unless there are (positive or negative) externalities associated with taxable activities that need to be internalized to achieve efficient market outcomes. They therefore seek to identify the type of tax system that will minimize this distortion. The latest scholarship shows that in the United States, the federal government effectively imposes higher investment taxes in higher education than the higher education subsidies, thereby contributing to the shortage of skilled workers and a very high difference in pre-tax income between highly educated and under-educated people.
Taxes can even have an effect on labor supply: we can consider the model in which consumers choose the amount of working hours spent and the amount spent in consumption. Let's assume there is only one good and no income is saved.
Consumers have a certain number of hours (H) divided between work (L) and leisure time (F = H - L). Hourly wages are called w and this tells us the opportunity cost of leisure, the income that the individual earns spends an extra hour of free time. Consumption and working hours have a positive relationship, more work hours mean more income and, assuming that workers do not save money, more income implies an increase in consumption (Y = C = w L). Time and free consumption can be considered as two normal goods (the worker has to decide between working one hour more, that means consuming more, or having one hour more free time) and budget constraints tend to be negative (Y = w (H - F)). The indifference curves associated with these two goods have a negative slope and leisure becomes increasingly important with high consumption levels. That's because a high level of consumption means people have spent many hours working, so, in this situation, they need more free time than consuming and that means that they have to be paid a higher salary to work an extra hour. Proportional income tax, changing the slope of the budget limit (now Y = w (1 - t ) (H - F)), implies substitution and income effects. The problem now is that the two effects are the opposite: the income effect tells us that, with income tax, the consumer feels poorer and for this reason he wants to work more, causing an increase in labor supply. On the other hand, the substitution effect tells us that leisure, being a normal good, is now more convenient than consumption and it implies a decline in labor supply. Therefore, the total effect can be either an increase or decrease in labor supply, depending on the shape of the indifference curve.
The Laffer curve describes the amount of government revenue as a function of the tax rate. This suggests that after a critical level, government revenues begin to decline as a consequence of falling labor bids. This theory supports that, if the system is located after the tipping point, a reduction in tax rates should imply an increase in labor supply which will in turn involve an increase in government revenue.
The government uses various types of taxes and varies tax rates. They do this to distribute the tax burden among individuals or classes of the population involved in taxable activities, such as the business sector, or to distribute resources between individuals or classes in the population. Historically, taxes for the poor supported the nobility; the modern social security system aims to support the poor, the disabled, or retire with taxes on those who are still employed. In addition, taxes are applied to finance foreign aid and military efforts, to influence macroeconomic economic performance (the government's strategy for doing so is called fiscal policy, see also tax exemption), or to change the pattern of consumption or employment in the economy, by making some classes of transactions more or less interesting.
The state tax system often reflects the communal values ​​and values ​​of those who have current political power. To create a tax system, the state must make choices about the distribution of tax burdens - who will pay taxes and how much they will pay - and how the taxes collected will be spent. In democratic countries where the public elects those responsible for the establishment or administration of the tax system, these choices reflect the kind of community the public wants to create. In countries where the public has no significant effect on the tax system, the system may reflect more closely the values ​​of those in power.
All large businesses bear administrative costs in the process of providing revenue collected from customers to suppliers of goods or services purchased. Taxation is no different; the resources collected from the public through taxation are always greater than the amounts that governments can use. The difference is called compliance costs and includes (for example) labor costs and other costs incurred in compliance with tax laws and regulations. Collection of taxes to spend on a particular purpose, for example collecting taxes on alcohol to pay for a direct rehab center of alcoholism, called a mortgage. Finance ministers often dislike this practice, because it reduces their freedom of action. Some economic theorists consider mortgages to be dishonest intellectually because, in fact, money can be exchanged. Furthermore, it is often the case that the taxes or excises originally imposed to fund certain government programs are then transferred to public funds. In some cases, such taxes are collected in fundamentally inefficient ways, for example, in spite of highway tolls.
Because the government also resolves commercial disputes, especially in countries with common law, similar arguments are sometimes used to justify sales tax or value added tax. Some (libertarians, for example) describe most or all tax forms as immoral because of their unintentional nature (and therefore ultimately coercion). The most extreme anti-tax view, anarcho-capitalism, states that all social services must be voluntarily purchased by those who use them.
Type
The Organization for Economic Co-operation and Development (OECD) publishes an analysis of the tax system in member countries. As part of the analysis, the OECD develops the definition and system of internal tax classification, generally followed below. In addition, many countries impose a tax (tariff) on the import of goods.
Earnings
Income tax
Many individual income tax jurisdictions and business entities, including corporations. Generally, taxes are levied on net income from business, net income, and other income. The calculation of taxable income may be determined on the basis of the accounting principles used in the jurisdiction, which may be modified or replaced by the principles of tax law in jurisdictions. Tax incidents vary by system, and some systems may be viewed as progressive or regressive. Tax rates may vary or are constant (flat) by income level. Many systems allow individuals certain personal benefits and other nonbusiness deductions for taxable income, although business cuts tend to be preferred over personal deductions.
Personal income tax is often collected on a pay-as-you-earn basis, with minor corrections made immediately after the end of the tax year. This correction takes one of two forms: payments to the government, to taxpayers who have not paid enough during the tax year; and tax refunds from the government for those who pay more. The income tax system often has available pieces that reduce the total tax liability by reducing the amount of taxable income. They can allow the loss of one type of income to be counted against one type of income. For example, losses in the stock market can be reduced by taxes paid on wages. Other tax systems can isolate losses, so business losses can only be reduced against business taxes by continuing losses to the next tax year.
Negative earnings
In the economy, the negative income tax (abbreviated as NIT) is a progressive income tax system in which people who earn below a certain amount receive additional payments from the government instead of paying taxes to the government.
Capital benefits
Most jurisdictions impose income tax treat capital gains as part of taxable income. Capital strengthening is generally an advantage of the sale of capital assets - that is, assets not held for sale in ordinary business activities. Capital assets include personal assets in many jurisdictions. Some jurisdictions provide preferential tax rates or just partial taxation for capital gains. Some jurisdictions impose different levels or rates of the capital gains tax on the basis of the asset's timeframe. Because tax rates are often lower for capital gains than ordinary income, there is widespread controversy and disputes about the exact definition of capital. Some tax scholars argue that differences in the way different types of capital and investment are taxed contribute to economic distortions.
Company
Company tax refers to income, capital, net worth, or other taxes imposed on the company. The tax rates and taxable basis for a company may differ from taxes to individuals or other taxable persons.
Social security contributions
Many countries provide publicly funded pensions or health care systems. In connection with this system, states usually require employers and/or employees to make compulsory payments. These payments are often calculated with reference to the wages or income of the entrepreneur. Tax rates are generally fixed, but different rates may apply to employers rather than to employees. Some systems provide a limit on taxable income. Some systems specify that taxes are paid only on wages above a certain amount. Such upper or lower limits may apply to the pension component but not tax health care. Some argue that the tax on wages is a form of "forced savings" and not tax, while others show redistribution through the system between generations (from newer to older groups) and across income levels (from more income levels high to lower income levels) indicating that the program is really a tax and spending program. Some tax experts argue that supporting the social security program exclusively through taxes on wages, rather than through a broader tax covering capital, creating distortions and lack of investment in human capital, since the return of such investments would be taxed as wages.
Payroll or labor
Unemployment and similar taxes are often imposed on employers on the basis of total payroll. This tax may be imposed at both the country and sub-country level.
Properties
Recurring property taxes may be imposed on real property and some classes of movable properties. In addition, recurring taxes may be imposed on the net worth of individuals or companies. Many jurisdictions impose property taxes, gift taxes, or other inheritance taxes on property at death or prize transfers. Some jurisdictions impose a tax on financial or capital transactions.
Property tax
A property tax (or millage tax) is an ad valorem tax tax levy on property values ​​that the property owner must pay to the government on which the property is located. Some jurisdictions may impose a tax on the same property. There are three common types of property: land, land repairs (non-removable human objects, such as buildings) and private property (moving objects). Real estate or realty is a combination of land and land improvement.
Property taxes are typically charged on a recurring basis (e.g., Yearly). A common type of property tax is the annual cost of ownership of real estate, where the tax base is the approximate value of the property. For a period of more than 150 years since 1695, window taxes are levied in the UK, with the result that people can still see buildings listed with brick windows to save the owner money. Similar taxes on fireplaces are in France and elsewhere, with similar results. The two most common types of event-driven property taxes are duty stamp duty, subject to change of ownership, and inheritance tax, which is imposed in many countries on the estate of the deceased.
In contrast to the tax on real estate (land and building), land value tax (or LVT) is imposed only on the value of unprofitable land ("land" in this case can mean either an economic term, that is, all natural resources, or resources nature associated with specific areas of the Earth's surface: "lots" or "plots"). Proponents of the land value tax argue that it is economically justified, as it will not inhibit production, distort market mechanisms or otherwise create deadweight losses as other taxes do.
When real estate is held by a higher government unit or other entity that is not taxed by the local government, the taxing authority may receive payment in lieu of taxes to compensate for part or all of the lost tax revenue.
In many jurisdictions (including many American states), there is a general tax levied periodically on people who have personal property within jurisdictions. Vehicle and vessel registration fees are part of this tax type. Taxes are often designed with blanket coverage and big exceptions for things like food and clothing. Household goods are often excluded when stored or used in households. Any other non-exclusionary item may lose its release if it is regularly kept outside the household. Thus, tax collectors often monitor newspaper articles for stories of wealthy people who have lent art to museums for public display, since the artwork is then subject to personal property taxes. If a work of art has to be sent to another state for some touch, it may be subject to a private property tax in that it country as well.
Inheritance
Inheritance taxes, inheritance taxes, and death or duty taxes are the names given to the various taxes that result in the death of a person. Within the United States tax law, there is a distinction between property tax and inheritance tax: the first one levies the personal tax of the deceased, while the latter collects the tax on the beneficiaries of the estate. However, this distinction does not apply in other jurisdictions; for example, if using this terminology, UK inheritance tax will be a property tax.
Expatriate
Expat taxes are taxes on individuals who renounce their citizenship or place of residence. Taxes are often imposed based on the disposition that is considered of all individual properties. One example is the United States under the American Jobs Creation Act , in which each individual has a net worth of $ 2 million or an average income tax liability of $ 127,000 that deprives his citizenship and leaves the country. are automatically assumed to have done so for tax avoidance reasons and are subject to higher tax rates.
Transfer
Historically, in many countries, the contract must have a stamped to make it valid. Billing for a seal is a fixed amount or a percentage of the transaction value. In most countries, postage has been removed but stamp duty remains. Stamp duty shall be levied in the United Kingdom for the purchase of shares and securities, carrier issues, and certain partnership transactions. Modern derivatives, stamp duty taxes and stamp duty taxes, are each charged on transactions involving securities and land. Stamp duty has the effect of shrinking the purchase of speculative assets by reducing liquidity. In the United States, transfer taxes are often imposed by state or local governments and (in the case of real property transfers) can be attributed to the recording of deed or other transfer documents.
Wealth (net worth)
Some governments of countries will require a declaration of the balance of payments of taxpayers (assets and liabilities), and therefore exactly taxes on net worth (assets minus liabilities), as a percentage of net worth, or a percentage of net worth exceeding a certain level. Taxes may be levied on natural "people" or "people".
Goods and services
Value added
Value Added Tax (VAT), also known as Goods and Services Tax (G.S.T), Single Business Tax, or Turnover Tax in some countries, applies the equivalent of a sales tax for each operation that creates value. To give an example, sheet steel is imported by the machine manufacturer. The manufacturer will pay VAT on the purchase price, handing the amount to the government. The manufacturer will then turn the steel into a machine, selling the machine at a higher price to the wholesale distributor. Manufacturers will collect VAT at a higher price, but will hand over to the government only the excess associated with "value added" (price over the cost of steel sheets). The wholesale distributor will then proceed, charging the retail distributor VAT over the entire price to the retailer, but only sending the amount associated with the mark-up distribution to the government. The final VAT amount is payable by a final retail customer who can not recover VAT previously paid. For VAT and sales tax identical rates, the total taxes paid are the same, but are paid at different points in the process.
VAT is typically administered by requiring companies to complete VAT refunds, providing details of their charged VAT (referred to as input tax) and VAT charged to other persons (referred to as output tax). The difference between the output tax and the input tax is paid to the Local Tax Authority.
Many tax authorities have introduced automated VAT that enhances accountability and auditability, by utilizing computer systems, thereby also enabling anti-cybercrime offices as well.
Sales
Sales tax is levied when a commodity is sold to the end consumer. Retail organizations argue that such taxes do not encourage retail sales. The question of whether they are generally progressive or regressive is the subject of current debate. People with higher incomes spend a lower proportion of them, so sales tax with fixed rates will tend to be regressive. It is therefore common to exclude food, utilities and other necessities from sales taxes, as the poor spend a higher proportion of their income on this commodity, so the exemption makes taxation more progressive. This is a classic "you pay for what you pay" tax, because only those who spend money on non-exclusive (ie fancy) items pay taxes.
A small number of US states rely entirely on sales taxes for state revenues, as they do not collect state income taxes. Such countries tend to have moderate to large tourist numbers or travel between countries occurring within their borders, allowing countries to take advantage of taxes from people who will not be taxed by the state. In this way, the state can reduce the tax burden for its citizens. The US states that it does not collect state income taxes are Alaska, Tennessee, Florida, Nevada, South Dakota, Texas, Washington state, and Wyoming. In addition, New Hampshire and Tennessee collect state income taxes only on dividends and interest income. Of the above countries, only Alaska and New Hampshire do not collect state sales taxes. Additional information can be obtained on the website of the Federation of Tax Administration.
In the United States, there is a growing movement for the replacement of all federal salaries and income taxes (both corporate and personal) with national retail sales tax and monthly tax rebates for legitimate citizens' households and legal residents. The tax proposal is named FairTax. In Canada, the federal sales tax is called the Goods and Services Tax (GST) and now stands at 5%. Provinces of British Columbia, Saskatchewan, Manitoba, and Prince Edward Island also have provincial sales tax [PST]. Province of Nova Scotia, New Brunswick, Newfoundland & amp; Labrador, and Ontario have aligned their provincial sales tax with GST - Harmonized Sales Tax [HST], and thus are full VAT. Quebec Province collects Quebec Sales Tax [QST] based on GST with certain differences. Most businesses can reclaim the GST, HST, and QST they pay, and very effectively it is the final consumer who pays the tax.
Excise
Customs is an indirect tax imposed on goods during the manufacturing, production or distribution process, and is usually proportional to the quantity or value. Customs was first introduced to England in 1643, as part of an income and taxation scheme created by MP John Pym and approved by the Long Parliament. These tasks consisted of allegations of beer, beer, apple cider, cherry wine, and tobacco, which then added paper, soap, candles, malts, hops and sweets. The basic principle of excise is that they are taxes on the production, manufacture or distribution of goods that can not be taxed through customs houses, and income derived from such sources is referred to as excise revenue. The fundamental conception of the term is the tax on goods produced or produced in a country. In the taxation of luxury goods such as liquor, beer, tobacco, and cigars, it is a practice to place certain obligations on the import of these goods (duties).
Excise (or exceptions from them) are also used to modify specific area consumption patterns (social engineering). For example, high taxes are used to reduce alcohol consumption, relative to other goods. This can be combined with hypotheses if the results are then used to pay for the cost of treating illnesses caused by alcohol abuse. Similar taxes may be in tobacco, pornography, etc., and they can be collectively referred to as "tax of sin". Carbon taxes are taxes on carbon-based non-renewable fuel consumption, such as gasoline, diesel, jet fuel, and natural gas. The goal is to reduce the release of carbon into the atmosphere. In the United Kingdom, vehicle customs is the annual tax on vehicle ownership.
Rates
Import or export rates (also called customs or taxes) are costs for the movement of goods through political borders. Tariffs hamper trade, and they can be used by governments to protect domestic industries. Some of the tariff revenue is often hypothesized to pay the government to keep the navy or border police. The classic ways to cheat tariffs are to smuggle or declare the value of the wrong goods. Modern tax rules, tariffs and trade are commonly brought together because of their general impact on industrial policy, investment policy, and agricultural policy. A trading block is a group of allied countries that agree to minimize or eliminate tariffs on trade with each other, and it is possible to enforce protective tariffs on imports from outside the block. A customs union has a common external tariff, and the participating countries share revenue from tariffs on goods that enter the customs union.
In some communities, tariffs may also be imposed by local authorities on the movement of goods between regions (or through certain internal gateways). A noteworthy example is likin , which is an important source of income for the local government in late Chinese Qing.
More
License fee
Job tax or license fees may apply to businesses or individuals involved in certain businesses. Many jurisdictions impose a tax on vehicles.
Polling
Voting tax, also called a per capita tax, or capitation tax, is a tax that levies a set amount per individual. This is an example of a fixed tax concept. One of the earliest taxes mentioned in the Bible a half-shekel per year of every adult Jew (Ex. 30: 11-16) is a form of voting tax. Tax collection is administratively cheap because they are easy to calculate and collect and difficult to deceive. Economists have considered poll taxes to be economically efficient because people are perceived to be in fixed supply and voting taxes therefore do not cause economic distortions. However, the voting tax is very unpopular because the poor pay a higher proportion of income than the rich. In addition, the actual supply of people is not fixed over time: on average, couples will choose to have fewer children if the voting tax is enacted. The introduction of tax polls in medieval England was a major cause of the 1381 Farmer Rebellion. Scotland was the first to be used to test a new voting tax in 1989 with England and Wales in 1990. The shift from local taxation was progressive based on property values ​​to a single tariff form taxes regardless of ability to pay (Community Fee, but more popularly referred to as Polling Tax), led to widespread refusal to pay and incidents of civil unrest, known everyday as the 'Tax Riot Poll'.
More
Several types of taxes have been proposed but not actually adopted in major jurisdictions. These include:
- Bank tax
- The financial transaction tax includes the currency transaction tax
Descriptive label
Ad valorem and per unit
The
Unlike the ad valorem tax is the per unit , in which the tax base is the quantity of something, regardless of the price. Excise tax is an example.
Consumption
Consumption tax refers to taxes on non-investment spending, and can be implemented using sales tax, consumer value added tax, or by modifying income tax to allow unlimited reduction for investment or savings.
Environment
This includes natural resource consumption taxes, greenhouse gas taxes (carbon tax), "sulfur taxes", and so on. The stated objective is to reduce environmental impact by repricing. Economists describe the environmental impact as a negative externality. In the early 1920s, Arthur Pigou suggested taxes to deal with externalities (see also section on Improving economic prosperity below). Proper application of environmental taxes has been a matter of long-standing debate.
Proportional, progressive, regressive, and lump-sum
An important feature of the tax system is the percentage of tax expense associated with income or consumption. Progressive, regressive, and proportional terms are used to describe how the rate progresses from low to high, from high to low, or proportionately. The terms describe the effect of distribution, which can be applied to any type of tax system (income or consumption) that meets the definition.
- Progressive tax is the tax imposed so that the effective tax rate increases when the rate charged increases.
- The opposite of progressive tax is regressive tax, where effective tax rate decreases when the applied rate of tariff increases. This effect is generally generated where the means of testing are used to withdraw tax benefits or state benefits.
- Among them are proportional taxes, in which the effective tax rate is set, while the rate charged increases.
- A lump-sum tax is a tax which is a fixed sum, regardless of the change in circumstances of a tax-imposed entity. This is actually a regressive tax because those with low incomes should use a higher percentage of their income than those who earn more and therefore the effect of taxes is reduced as a function of income.
The term can also be used to apply meaning to the taxation of select consumption, such as tax on luxury goods and the exemption of basic necessities can be described as having a progressive effect as it increases the tax burden on high end consumption and lower taxes. burdening low consumption.
Live and indirect
Taxes are sometimes referred to as "direct taxes" or "indirect taxes". The meanings of these terms can vary in different contexts, which can sometimes cause confusion. The economic definition, by Atkinson, states that "... direct taxes can be tailored to the individual characteristics of the taxpayer, whereas the indirect taxes are imposed on transactions irrespective of the circumstances of the buyer or seller." According to this definition, for example, income tax is "direct", and sales tax is "indirect". By law, these terms may have different meanings. In US constitutional law, for example, direct taxes refer to polling and property taxes, based on simple existence or ownership. Indirect taxes apply to events, rights, privileges, and activities. Accordingly, the tax on the sale of property will be considered an indirect tax, whereas the tax on having only the property itself will be a direct tax.
Cost and effective
Governments may impose user fees, tolls or other types of valuation in exchange of goods, services or use of certain property. These are generally not considered taxable, as long as they are levied as payments for direct benefits to paying individuals. These costs include:
- Toll: fees charged for traveling by road, bridge, tunnel, canal, waterway, or other transport facilities. Historically tolls have been used to pay for public bridge projects, roads and tunnels. They have also been used in privately-built transport links. Estimated tolls are likely to be fixed costs, may pass for vehicle types, or for long distance routes.
- User fees, as billed for park use or other government-owned facilities.
- Charges charged by government agencies to make decisions in certain situations.
Some scholars refer to certain economic effects as taxes, even though they are not imposed levies by the government. These include:
- Inflation tax: economic losses suffered by cash holders and cash equivalents in a single currency denomination because of the effects of expansionary monetary policy
- Financial oppression: Government policies such as interest rate limits on government debt, financial regulation such as reserve requirements and capital controls, as well as barriers to entry in markets where the government owns or controls the business.
History
The first known tax system was in Ancient Egypt about 3000-2800 BC in the First Egyptian Dynasty of the Old Kingdom of Egypt. The earliest and most extensive forms of taxation are corvÃÆ'Â © e and tithes. Korcv is the forced labor given to the country by the farmers who are too poor to pay taxes in other forms ( laborers in ancient Egypt were synonymous for taxes). The note from the time document that Pharaoh would do a two-year royal tour, collecting tithes from people. Another note is land shark on chalk and papyrus fragments. Initial leasing is also described in the Bible. In Genesis (chapter 47, verse 24 - New International Version), it states "But when the harvest comes in, give one fifth to Pharaoh, four fifths that you save as a seed for the field and as food for you and your household and for your children, your child ". Joseph told the Egyptians how to divide their crops, giving some to Pharaoh. The share (20%) of the yield is taxes (in this case, special taxes and non-tax rates, as it is collected against estimated starvation).
In the Persian Empire, a regulated and sustainable tax system was introduced by Darius I the Great in 500 BC; the Persian tax system is designed for each Satgrat (the area governed by Satrap or the provincial governor). At different times, there are between 20 and 30 Satrapies in the Empire and each is judged according to the required productivity. It is Satrap's responsibility to collect the appropriate amount and send it to the treasury, after deducting its expenses (expenditure and the power to decide exactly how and from whom to raise money in the province, offering maximum opportunity for the wealthy). The number requested from different provinces provides a clear picture of their economic potential. For example, Babylon is judged for the highest amount and for a surprising mix of commodities; 1,000 silver talents and four months of food supply for soldiers. India, a province devoted to gold, is to supply gold dust of equal value to an enormous amount of 4,680 silver talents. Egypt is known for its wealth of crops; it became a granary of the Persian Empire (and, later, the Roman Empire) and was asked to provide 120,000 grain sizes in addition to 700 silver talents. This tax is exclusively levied on Satrapies based on their lands, productive capacity and respect levels.
The Rosetta Stone, a tax concession issued by Ptolemeus V in 196 BC and written in three languages ​​"led to the most famous decomposition in history - a hieroglyphic breakdown".
The Islamic rulers enacted the jizya (voting tax to conquer non-Muslims). In India this practice began in the 11th century.
Trends
A number of government tax collection records in Europe since at least the 17th century are still available today. But the rate of taxation is difficult to compare with the size and flow of the economy because the amount of production is not available. Government spending and revenues in France during the 17th century increased from about 24.30 million livres in 1600-10 to about 126.86 million livres in 1650-59 to about 117.99 million livres in 1700-10 when government debt had reached 1.6 billion livres . In 1780-89, it reached 421.50 million livres . Taxation as a percentage of final goods production may have reached 15-20% during the 17th century in places such as France, The Netherlands, and Scandinavia. During the war years of the eighteenth and early nineteenth centuries, tax rates in Europe increased dramatically as the war became more expensive and the government became more centralized and adept at collecting taxes. This largest increase in the UK, Peter Mathias and Patrick O'Brien found that the tax burden increased by 85% during this period. Another study confirmed this figure, finding that per capita tax revenues had increased almost sixfold during the eighteenth century, but the steady economic growth it had made a real burden on every individual only doubled during this period before the industrial revolution. Effective tax rates were higher in the UK than in France in the years before the French Revolution, twice in comparable per capita income, but they were mostly placed on international trade. In France, taxes are lower but the burden is primarily on landowners, individuals, and internal trade and thus creating far more hate.
Taxation as a percentage of GDP 2016 is 45.9% in Denmark, 45.3% in France, 33.2% in the UK, 26% in the United States, and among all OECD members averaging 34.3%.
Form
In the monetary economy before fiat banking, the important form of taxation is seigniorage, the tax on the creation of money.
Other obsolete forms of taxation include:
- Scutage, paid in lieu of military service; strictly speaking, it is a substitution of a non-tax liability rather than such tax but serves as a tax in practice.
- Tallage, feudal responsibility tax.
- Tithe, payments such as taxes (one-tenth of one's income or agricultural produce), are paid to the Church (and thus too specific to tax in strict technical terms). This should not be equated with modern practice of the same name which is usually voluntary.
- (Feudal) aids, a kind of tax or payment paid by the followers to his lord during the feudal period.
- Danegeld, a medieval land tax originally raised to pay off a Danish raid and then used to fund military expenditure.
- Carucage, a replacing tax and aegeld in the UK.
- Agricultural tax, the principle of granting responsibility for the collection of tax revenues to citizens or private groups.
- Socage, a feudal tax system based on ground rent.
- Theft, feudal tax system based on land rent.
Some headmasters burden windows, doors, or cabinets to reduce consumption of imported glass and hardware. Armor, cages, and cabinets are employed to avoid taxes on doors and cabinets. In some circumstances, taxes are also used to enforce public policies such as congestion charges (to cut road traffic and encourage public transport) in London. In the Russian Tsar, the tax is clamped on a beard. Today, one of the most complicated taxation systems in the world is in Germany. Three quarters of the world's taxation literature refers to the German system. Under the German system, there are 118 laws, 185 forms, and 96,000 regulations, spending EUR3.7 billion to collect income taxes. In the United States, the IRS has approximately 1,177 forms and instructions, 28,4111 megabytes of Internal Revenue Code containing 3.8 million words as of February 1, 2010, a number of tax laws in the Federal Code of Regulations, and supply materials in the Internal Revenue Bulletin. Currently, governments in more developed countries (ie Europe and North America) tend to rely more on direct taxes, while developing economies (ie India and some African countries) rely more on indirect taxes.
Economic effects
In economic terms, taxation transfers wealth from household or business to a country's government. Adam Smith wrote on The Wealth of Nations
- "... private people's economic income is of three main types: rent, profit and wage.General taxpayers will eventually pay their taxes from at least one source of this income.The government may intend that certain taxes must fall exclusively on rent, profit, or wages - and that other taxes must fall on all three sources of personal income together. However, many taxes will inevitably fall on resources and people very different from those intended... Good taxes meet four main criteria, namely (1) comparable to certain income or ability (2) rather than arbitrary (3) paid on time and in a convenient way for taxpayers and (4) cheap to manage and collect. " Smith, Adam (2015). The Wealth of Nations: Translations in Modern English . Industrial System Research. p.Ã, 429. ISBNÃ, 978-0-906321-70-6. Ã, & lt;/ref & gt;
The side effects of taxation (such as economic distortions) and theories about how best to tax are important subjects in microeconomics. Taxation is almost never a simple transfer of wealth. The theory of taxation economy approaches the question of how to maximize economic prosperity through taxation.
Incident
The law establishes from whom taxes are collected. In many countries, taxes are levied on businesses (such as corporate taxes or parts of payroll taxes). However, who ends up paying taxes ("burden" taxes) is determined by the market because the tax becomes embedded into production costs. Economic theory shows that the economic effects of taxes do not always fall at the point where the tax is levied legally. For example, taxes on jobs paid by employers will impact employees, at least in the long term. The lion's share of the tax burden tends to fall on the most inelastic factor involved - part of the transaction most affected by price changes. So, for example, the tax on wages in the city will (at least in the long run) affect property owners in the area.
Depending on how the amount provided and requested varies with the price ("elasticity" of supply and demand), the tax may be absorbed by the seller (in the form of a lower pre-tax price), or by the buyer (in the form of a higher post-tax price). If the supply elasticity is low, more taxes will be paid by the supplier. If the elasticity of demand is low, more will be paid by the customer; and, conversely for cases where elasticity is high. If the seller is a competing company, the tax burden is distributed over the factors of production depending on its elasticity; this includes workers (in the form of lower wages), capital investors (in the form of losses to shareholders), landowners (in the form of lower rent), entrepreneurs (in the form of lower wages of superintendence) and customers (in the form higher prices).
To show this relationship, suppose that the market price of a product is $ 1.00, and that $ 0.50 tax is charged on products that, by law, must be collected from the seller. If the product has elastic demand, most taxes will be absorbed by the seller. This is because the goods with elastic demand lead to a large drop in the amount demanded for small price increases. Therefore, to stabilize sales, the seller absorbs more additional tax burden. For example, a seller may lower the price of the product to $ 0.70 so that, after adding taxes, the buyer pays a total of $ 1.20, or $ 0.20 more than before the $ 0.50 tax is imposed. In this example, the buyer has paid $ 0.20 of tax $ 0.50 (in the form of a post-tax price) and the seller has paid the remaining $ 0.30 (in the form of a lower pre-tax price).
Increased economic prosperity
Government spending
The purpose of taxation is to provide government spending without inflation. The provision of public goods such as roads and other infrastructure, schools, social safety nets, health care, national defense, law enforcement, and court systems improve the economic welfare of the community if benefits exceed the costs involved.
Pigovian
The existence of taxes can improve economic efficiency in some cases. If there is a negative externality associated with good, which means that it has a negative effect that is not perceived by the consumer, then the free market will trade too much of the goods. By burdening goods, the government can improve overall welfare and increase revenue. This type of tax is called Pigovian tax, after economist Arthur Pigou.
Possible Pigovian taxes include taxes that use pollutant fuel (such as gasoline), taxes on goods that are charged for public health care (such as alcohol or tobacco), and the cost of an existing 'free' public good (such as congestion) is a possibility other.
Reduce inequality
Progressive taxation can reduce economic inequality. This effect occurs even when tax revenues are not redistributed.
Reduced economic prosperity
Most taxes (see below) have side-effects that reduce economic well-being, either by mandating unproductive labor (compliance costs) or by creating distortions to economic incentives (deadweight losses and adverse incentives).
Cost of compliance
Although the government must spend money on tax collection activities, some fees, especially for keeping records and filling out forms, are borne by businesses and by individuals. These are collectively called compliance costs. More complex tax systems tend to have higher compliance costs. This fact can be used as a basis for practical or moral arguments in favor of tax simplifications (such as FairTax or OneTax, and some flat tax proposals).
Deadweight's Cost
In the absence of negative externalities, the introduction of taxes to markets reduces economic efficiency by causing deadweight losses. In a competitive market, the price of a particular economic adjustment adjusts to ensure that all trade that benefits both buyers and sellers of goods occurs. The introduction of taxes causes the price received by the seller to be less than the cost to the buyer by tax amount. This causes fewer transactions to occur, which reduces economic well-being; the people or businesses involved are less good than before taxes. The tax burden and the amount of deadweight costs depend on the elasticity of supply and demand for good taxes.
Most taxes - including income taxes and sales taxes - can have significant deadweight costs. The only way to avoid the cost of dead weight in a generally competitive economy is to refrain from taxes that change economic incentives. Such taxes include land value taxes, where taxes are goods in inventory that are entirely inelastic, lump sum tax such as voting tax (head tax) paid by all adults regardless of their choice. Arguably unexpectedly unexpectedly unexpected profit taxes can also fall into this category.
The loss of dead weight does not take into account the influence of taxes in leveling the playing field of business. Businesses that have more money are better suited to fend off the competition. It is common that an industry with a very small number of large companies has a very high entry barrier for new entrants entering the market. This is due to the fact that the larger the company, the better its position to negotiate with suppliers. Also, larger companies may be able to operate with low or even negative profits for a long time, thus encouraging competition. However, progressive taxation of profits will reduce such barriers for newcomers, increasing competition and ultimately benefiting consumers.
Incorrect incentives
The complexity of the tax code in the developed world offers a bad tax incentive. The more details of tax policies, the more opportunities for tax law avoidance and illegal tax evasion. This not only generates lost revenue, but also involves additional costs: for example, payments made for tax advice are basically a death charge because they do not add wealth to the economy. Bad incentives also occur because of non-taxable 'hidden' transactions; for example, sales from one company to another may be responsible for sales tax, but if the same item is shipped from one branch of the company to another, no taxes will be paid.
To solve this problem, economists often suggest a simple and transparent tax structure that avoids the provision of loopholes. Sales taxes, for example, may be replaced by value-added taxes that neglect intermediary transactions.
Reduced production
If taxes are paid on outsourcing services that are not also charged on self-service, then it may be cheaper to do the service on its own than paying someone else - even considering losses in economic efficiency.
For example, work A and B are both worth $ 1 in the market. And suppose that because of your unique ability, you can do A work twice more (100% extra output) in the same effort as it will take you to do work B. But job B is one you need to do now. Under the perfect division of labor, you will do A's work and others will do the job B. Your unique abilities will always be appreciated.
Income taxes have the worst effect on the division of labor in the form of barter. Suppose the person doing the job B is actually interested in the work done for him. Now suppose you can do extraordinary jobs fourfold, selling half of your work in the market with cash just to pay your tax bill. The other half of the work you do for someone who does work B twice more but he has to sell half to pay his tax bill. You are left with one work unit B, but only if you are 400% as productive in doing A's job! In this case a 50% tax on barter income, less than 400% productivity will cause the division of labor to fail.
In short, depending on the situation the 50% tax rate can cause the division of labor to fail even where a productivity increase of up to 300% will be generated. Even tariff pa
Source of the article : Wikipedia
0 Comments