Public finance
This article is part of the series: Finance and Taxation
Taxation
Income tax  ·  Payroll tax CGT ·  Stamp duty  ·  LVT Sales tax  ·  VAT  ·  Flat tax Tax, tariff and trade Tax haven
Tax incidence
Tax rate  ·   Proportional tax Progressive tax  ·   Regressive tax Tax advantage
Taxation by country Australia • British Virgin Islands Canada • China • Colombia France • Germany • Hong Kong India • Indonesia • Ireland Netherlands • New Zealand Peru • Russia • Singapore Tanzania • United Kingdom United States • European Union  v • d • e  Tax rates around the world Tax revenue as % of GDP
Economic policy
Monetary policy Central bank  ·   Money supply Gold standard
Fiscal policy Spending  ·   Deficit  ·   Debt
Policy-mix
Trade policy Tariff  ·   Trade agreement
Finance
Financial market Financial market participants Corporate  ·   Personal Public  ·   Regulation
Banking
Fractional-reserve Full-reserve  ·   Free banking Islamic
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A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (for example, secessionist movements or revolutionary movements). Public finance is a field of economics concerned with paying for collective or governmental activities and with the administration and design of those activities The field of finance refers to the concepts of Time, Money and Risk and how they are interrelated Payroll tax generally refers to two kinds of taxes: Taxes which Employers are required to withhold from Employees Pay, also known as Withholding A capital gains tax (abbreviated CGT) is a Tax charged on Capital gains the profit realized on the sale of a non-inventory Asset that was purchased Stamp duty is a form of Tax that is levied on documents Historically a physical stamp (a Tax stamp) had to be attached to or impressed upon the document to denote Land value taxation (LVT (or site value taxation) is an Ad valorem tax where only the value of land itself is taxed A sales tax is a Consumption tax charged at the Point of purchase for certain goods and services Value added tax ( VAT) or goods and services tax ( GST) is a consumption Tax levied on value added. A flat tax (short for flat rate tax is a Tax system with a constant tax rate The tax tariff and trade laws of a political region State or Trade bloc determine which forms of consumption and production tend to be encouraged A tax haven is a place where certain Taxes are levied at a low rate or not at all In Economics, tax incidence is the analysis of the effect of a particular Tax on the distribution of economic welfare. In a Tax system and in Economics, the tax rate describes the burden Ratio (usually expressed as a Percentage) at which a business or person is A proportional tax is a Tax imposed so that the Tax rate is fixed as the amount subject to taxation increases A progressive tax is a Tax imposed so that the Tax rate increases as the amount subject to taxation increases A regressive tax is a Tax imposed in such a manner that the Tax rate decreases as the amount subject to taxation increases Tax advantage refers to the economic bonus which applies to certain accounts or Investments that are by Statute, tax-reduced tax-deferred or tax-free Personal income taxes See also Income tax in Australia Only the federal government imposes income taxes on individuals and this is the most significant source of Taxation in the British Virgin Islands is relatively simple by comparative standards photocopies of all of the tax laws of the British Virgin Islands would together amount to about 200 The level of Taxation in Canada is average among Organisation for Economic Co-operation and Development (OECD countries Taxes provide the most important revenue source for the Government of the People's Republic of China. See Government of Colombia for a wider perspective of Colombian government See Government of France for a wider perspective of French government Taxes in Germany —being a Federal Republic —are levied by the federation ( Bund) the States ( Länder) as well as the HK Inland Revenue Ordinance Cap112 is one of Hong Kong's Ordinances Taxes in India are levied by the Central Government and the State Governments This article ls with Taxation in Indonesia or pajak. Definitions "Pajak" in Indonesian for Tax and taxes whereas " Perpajakan The system of Taxation in Ireland is broadly similar to the system of Taxation in the United Kingdom. The Netherlands has a rich history dealing with taxation predating the Romanic period. Taxation in New Zealand is collected at a national level by the Inland Revenue Department (IRD on behalf of the Government of New Zealand. The Income tax in Peru is collected by the Superintendencia Nacional de Administración Tributaria, best known as SUNAT. The Russian Tax Code is the primary tax law for the Russian Federation. Individual income tax in Singapore forms part of two main sources of Income tax, the other being Corporate taxes on companies In Tanzania the Income Tax Act 2004 came into effect in July 2004 Taxation in the United Kingdom may involve payments to a minimum of two different levels of government The central government ( Her Majesty's Revenue and Customs) Taxation in the United States is a complex system which may involve payment to at least four different levels of government and many methods of taxation Value added tax ( VAT) or goods and services tax ( GST) is a consumption Tax levied on value added. Comparison of Tax Rates around the world is a difficult and somewhat subjective enterprise This table lists countries by total 2005 Tax revenues (federal state and local as a percentage of GDP (Gross Domestic Product Economic policy refers to the actions that Governments take in the economic field. Monetary policy is the process by which the Government, Central bank, or monetary authority of a country controls (i the Supply of Money, A central bank, reserve bank, or monetary authority is the entity responsible for the Monetary policy of a country or of a group of member states In Economics, money supply, or money stock, is the total amount of money available in an Economy at a particular point in time The gold standard is a monetary system in which a region's common media of exchange are paper notes that are normally freely convertible into pre-set fixed quantities of Gold Fiscal policy, taking the scope of Budgetary policy, refers to government policy that attempts to influence the direction of the economy through changes in government taxes Government spending or government expenditure is classified by economists into three main types A budget deficit occurs when an Entity (often a Government) spends more Money than it takes in Government debt (also known as public debt or national debt) is Money (or credit) owed by any level of government either Central government Trade is the willing exchange of goods, services, or both Trade is also called Commerce. For other uses of this word see Tariff (disambiguation. A tariff is a tax imposed on goods when they are moved across a political boundary A trade pact is a wide ranging Tax tariff and trade pact that often includes Investment guarantees The field of finance refers to the concepts of Time, Money and Risk and how they are interrelated In Economics, a financial market is a mechanism that allows people to easily buy and sell ( Trade) financial Securities (such as stocks and bonds There are two basic financial market participant categories Investor vs Corporate finance is an area of Finance dealing with the financial decisions Corporations make and the tools and analysis used to make these decisions Personal finance is the application of the principles of Finance to the monetary decisions of an individual or family unit Public finance is a field of economics concerned with paying for collective or governmental activities and with the administration and design of those activities Financial regulations are a form of Regulation or supervision which subjects Financial institutions to certain requirements restrictions and guidelines aiming to A banker or bank is a Financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money Fractional-reserve banking is the banking practice in which Banks keep only a fraction of the value of their Bank notes and demand deposits in reserve Full-reserve banking is the Banking practice in which the full amount of each depositor's funds are available in reserve at the bank when each depositor Free banking is a theory of Banking in which commercial banks and market forces control the provision of banking services Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law ( Sharia) principles and guided by Islamic economics Note This Wikipedia entry deals with the legal concept legal person. A state is a political association with effective Sovereignty over a geographic Area and representing a Population. Secession (derived from the Latin term secessio is the act of withdrawing from an organization union or especially a political entity A revolutionary when used as a noun is a person who either actively engages in some kind of Revolution, or advocates the revolution with recognition from some government or Taxes are also imposed by many subnational entities. Examples of administrative divisions English terms In many of the following terms corresponding to British cultural influence areas of relatively low mean population Taxes consist of direct tax or indirect tax, and may be paid in money or as its labour equivalent (often but not always unpaid). The term direct tax has more than one meaning a colloquial meaning and in the United States a constitutional law meaning The term indirect tax has more than one meaning In the colloquial sense an indirect tax (such as Sales tax, Value added tax (VAT or Goods and services Money is anything that is generally accepted as Payment for Goods and services and repayment of Debts. A tax may be defined as a "pecuniary burden laid upon individuals or property to support the government […] a payment exacted by legislative authority. "^[1] A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government […] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name. "^[1]

In modern taxation systems, taxes are levied in money, but in-kind and corvée taxation are characteristic of traditional or pre-capitalist states and their functional equivalents. The method of taxation and the government expenditure of taxes raised is often highly debated in politics and economics. Politics Politics is the process by which groups of people make decisions Economics is the social science that studies the production distribution, and consumption of goods and services. Tax collection is performed by a government agency such as Canada Revenue Agency, the Internal Revenue Service (IRS) in the United States, or Her Majesty's Revenue and Customs (HMRC) in the UK. The Canada Revenue Agency (CRA ( Revenue Canada under the Federal Identity Program) a federal agency that administers Tax laws for the Government of The The United States of America —commonly referred to as the The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom, the UK or Britain,is a Sovereign state located When taxes are not fully paid, civil penalties (such as fines or forfeiture) or criminal penalties (such as incarceration)^[2] may be imposed on the non-paying entity or individual. FINE was created in 1998 and is an informal association of the four main Fair Trade networks F Fairtrade Labelling Organizations International Asset forfeiture is a term used to describe the confiscation of Assets, by the State, which are either (a the proceeds of Crime or (b the instrumentalities Incarceration is the detention of a person in Jail or Prison.

Tax can result in anything from the mechanisms of slavery to the fruits of re-distributive social revolution, depending on the details of its implementation.

Contents 1 Purposes and effects 1.1 The Four "R"s 1.2 Proportional, progressive, and regressive 1.3 Direct and indirect 1.4 Tax burden 1.5 Morality 1.5.1 Government theft 1.5.2 Democratic defense 1.5.3 Land Tax defense 1.5.4 Justification 2 History 2.1 Taxation levels 2.2 Forms of taxation 3 Tax rates 3.1 Deadweight costs of taxation 3.2 Double dividend taxes 3.3 Optimal taxation theory 3.4 Transparency and simplicity 3.5 Economics of tax incidence 3.6 Costs of compliance 4 Kinds of taxes 4.1 Ad valorem 4.2 Environment Affecting Tax 4.3 Capital gains tax 4.4 Consumption tax 4.5 Corporation tax 4.6 Excises 4.7 Income tax 4.8 Inheritance tax 4.9 Poll tax 4.10 Property tax 4.11 Retirement tax 4.12 Sales tax 4.13 Tariffs 4.14 Toll 4.15 Transfer tax 4.16 Value Added Tax / Goods and Services Tax 4.17 Wealth (net worth) tax 5 See also 5.1 By country or region 6 Notes 7 External links

Purposes and effects

Funds provided by taxation have been used by states and their functional equivalents throughout history to carry out many functions. Some of these include expenditures on war, the enforcement of law and public order, protection of property, economic infrastructure (roads, legal tender, enforcement of contracts, etc. Law is a system of rules enforced through a set of Institutions used as an instrument to underpin civil obedience politics economics and society In Urban planning, the notion of " public order " refers to a City containing relatively empty (and orderly Spaces which allow for flexibility Property is any physical or virtual entity that is owned by an individual A road is an identifiable route, way or path between two or more places. Legal tender or forced tender is Payment that by Law, cannot be refused in settlement of a Debt ( Debtor cannot successfully be sued ), public works, social engineering, and the operation of government itself. Public works are the construction or engineering projects carried out by the State on behalf of the Community. Social engineering is a concept in Political science that refers to efforts to influence popular Attitudes and Social behavior on a large scale whether Most modern governments also use taxes to fund welfare and public services. "Social welfare" redirects here For other uses see Welfare A social welfare provision refers to any program which seeks to provide Public services is a term usually used to mean services provided by Government to its Citizens, either directly (through the Public sector) or These services can include education systems, health care systems, pensions for the elderly, unemployment benefits, and public transportation. This is a list of articles on Education organized by country A Education in Afghanistan Education in Albania This article describes policy-related systems For the article on hospital networks which are sometimes referred to as health care systems see Hospital network. A pension is a steady income given to a person upon Retirement, typically in the form of a guaranteed annuity. Unemployment benefits are payments made by Governments to unemployed people Energy, water and waste management systems are also common public utilities. An electric utility is a company (often a Public utility) that engages in the generation, transmission, and distribution of electricity for sale Water management is the practices of planning developing distribution and optimum utilizing of water resources under defined water polices and regulations Waste management is the collection Transport, processing, Recycling or disposal of Waste materials A public utility (usually just utility) is an organization that maintains the Infrastructure for a public service (often also providing a service using Colonial and moderning states have also used cash taxes to draw or force reluctant subsistence producers into cash economies.

Governments use different kinds of taxes and vary the tax rates. This is done to distribute the tax burden among individuals or classes of the population involved in taxable activities, such as business, or to redistribute resources between individuals or classes in the population. A business (also called firm or an enterprise) is a legally recognized organizational entity designed to provide goods and/or services to Historically, the nobility were supported by taxes on the poor; modern social security systems are intended to support the poor, the disabled, or the retired by taxes on those who are still working. Nobility is a government-privileged title which may be either hereditary (see Hereditary titles) or for a lifetime Social security primarily refers to a Social insurance program providing social protection or protection against socially recognized conditions including poverty old In addition, taxes are applied to fund foreign and military aid, to influence the macroeconomic performance of the economy (the government's strategy for doing this is called its fiscal policy - see also tax exemption), or to modify patterns of consumption or employment within an economy, by making some classes of transaction more or less attractive. Macroeconomics is a branch of Economics that deals with the performance structure and behavior of a national or regional Economy as a whole Fiscal policy, taking the scope of Budgetary policy, refers to government policy that attempts to influence the direction of the economy through changes in government taxes A tax exemption is an exemption from all or certain Taxes of a state or nation in which part of the taxes that would normally be collected from an individual or an organization

A nations tax system is often a reflection of its communal values or the values of those in power. To create a system of taxation, a nation must make choices regarding the distribution of the tax burden — who will pay taxes and how much they will pay — and how the taxes collected will be spent. In democratic nations where the public elects those in charge of establishing the tax system, these choices reflect the type of community which the public wishes to create. In countries where the public does not have a significant amount of influence over the system of taxation, that system may be more of a reflection on the values of those in power.

The resource collected from the public through taxation is always greater than the amount which can be used by the government. The difference is called compliance cost, and includes for example the labour cost and other expenses incurred in complying with tax laws and rules. The collection of a tax in order to spend it on a specified purpose, for example collecting a tax on alcohol to pay directly for alcoholism rehabilitation centres, is called hypothecation. See also Hypothec. The original use of the word hypothecation was for a pledge of property as collateral for a Debt without This practice is often disliked by finance ministers, since it reduces their freedom of action. The finance minister is a Cabinet position in a Government. A minister of Finance (also called financial affairs the treasury the economy or economic Some economic theorists consider the concept to be intellectually dishonest since (in reality) money is fungible. Fungibility is the property of a good or a Commodity whose individual units are capable of mutual substitution Furthermore, it often happens that taxes or excises initially levied to fund some specific government programs are then later diverted to the government general fund. In some cases, such taxes are collected in fundamentally inefficient ways, for example highway tolls.

Some economists, especially neo-classical economists, argue that all taxation creates market distortion and results in economic inefficiency. Neoclassical economics is a term variously used for approaches to Economics focusing on the determination of prices outputs and income distributions in markets A market distortion is a specific type of Market failure brought about by deliberate government regulation which prevents economic agents from freely establishing a clearing They have therefore sought to identify the kind of tax system that would minimize this distortion. Also, one of every government's most fundamental duties is to administer possession and use of land in the geographic area over which it is sovereign, and it is considered economically efficient for government to recover for public purposes the additional value it creates by providing this unique service.

Since governments also resolve commercial disputes, especially in countries with common law, similar arguments are sometimes used to justify a sales tax or value added tax. Common law refers to law and the corresponding legal system developed through decisions of courts and similar tribunals rather than through legislative statutes or executive A sales tax is a Consumption tax charged at the Point of purchase for certain goods and services Value added tax ( VAT) or goods and services tax ( GST) is a consumption Tax levied on value added. Others (e. g. libertarians) argue that most or all forms of taxes are immoral due to their involuntary (and therefore eventually coercive/violent) nature. Libertarianism is a term used by a broad spectrum of political philosophies which prioritize individual Liberty and seek to minimize or even abolish the The most extreme anti-tax view is anarcho-capitalism, in which the provision of all social services should be a matter of voluntary private contracts. Anarcho-capitalism (also known as Free-market anarchism) is an individualist anarchist Political philosophy that advocates the elimination A contract is an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law

The Four "R"s

Taxation has four main purposes or effects: Revenue, Redistribution, Repricing, and Representation. ^[3]

The main purpose is revenue: taxes raise money to spend on roads, schools and hospitals, and on more indirect government functions like good regulation or justice systems. In business revenue or revenues is Income that a company receives from its normal business activities usually from the sale of goods and services This is the most widely known function. ^[3]

A second is redistribution. Normally, this means transferring wealth from the richer sections of society to poorer sections, and this function is widely accepted in most democracies, although the extent to which this should happen is always controversial. Democracy is a form of government in which the supreme power is held completely by the people under a free electoral system ^[3]

A third purpose of taxation is repricing. Taxes and subsidies have the effect of shifting the quantity and price of goods Taxes are levied to address externalities: tobacco is taxed, for example, to discourage smoking, and many people advocate policies such as implementing a carbon tax. Tobacco is an Agricultural product recognized as an addictive drug processed from the fresh Leaves of plants in the genus Nicotiana. A carbon tax is an environmental Tax on emissions of Carbon dioxide and other Greenhouse gases It is an example of a pollution tax. ^[3]

A fourth, consequential effect of taxation in its historical setting has been representation. In Politics, representation describes how political power is alienated from most of the members of a group and vested for a certain time period in the hands of a small subset ^[3] The American revolutionary slogan "no taxation without representation" implied this: rulers tax citizens, and citizens demand accountability from their rulers as the other part of this bargain. Several studies have shown that direct taxation (such as income taxes) generates the greatest degree of accountability and better governance, while indirect taxation tends to have smaller effects. The term direct tax has more than one meaning a colloquial meaning and in the United States a constitutional law meaning Accountability is a concept in Ethics with several meanings It is often used synonymously with such concepts as answerability enforcement responsibility, blameworthiness The term indirect tax has more than one meaning In the colloquial sense an indirect tax (such as Sales tax, Value added tax (VAT or Goods and services ^[4][5]

Proportional, progressive, and regressive

Main articles: Proportional tax, Progressive tax, and Regressive tax

An important feature of tax systems is the percentage of the tax burden as it relates to income or consumption. A proportional tax is a Tax imposed so that the Tax rate is fixed as the amount subject to taxation increases A progressive tax is a Tax imposed so that the Tax rate increases as the amount subject to taxation increases A regressive tax is a Tax imposed in such a manner that the Tax rate decreases as the amount subject to taxation increases The terms progressive, regressive, and proportional are used to describe the way the rate progresses from low to high, from high to low, or proportionally. The terms describe a distribution effect, which can be applied to any type of tax system (income or consumption) that meets the definition. A progressive tax is a tax imposed so that the effective tax rate increases as the amount to which the rate is applied increases. A progressive tax is a Tax imposed so that the Tax rate increases as the amount subject to taxation increases In a Tax system and in Economics, the tax rate describes the burden Ratio (usually expressed as a Percentage) at which a business or person is The opposite of a progressive tax is a regressive tax, where the effective tax rate decreases as the amount to which the rate is applied increases. A regressive tax is a Tax imposed in such a manner that the Tax rate decreases as the amount subject to taxation increases In between is a proportional tax, where the effective tax rate is fixed as the amount to which the rate is applied increases. A proportional tax is a Tax imposed so that the Tax rate is fixed as the amount subject to taxation increases The terms can also be used to apply meaning to the taxation of select consumption, such as a tax on luxury goods and the exemption of basic necessities may be described as having progressive effects as it increases a tax burden on high end consumption and decreases a tax burden on low end consumption. ^[6][7][8]

Direct and indirect

Main articles: Direct tax and Indirect tax

Taxes are sometimes referred to as direct tax or indirect tax. The term direct tax has more than one meaning a colloquial meaning and in the United States a constitutional law meaning The term indirect tax has more than one meaning In the colloquial sense an indirect tax (such as Sales tax, Value added tax (VAT or Goods and services The meaning of these terms can vary in different contexts, which can sometimes lead to confusion. In economics, direct taxes refer to those taxes that are collected from the people or organizations on whom they are ostensibly imposed. For example, income taxes are collected from the person who earns the income. By contrast, indirect taxes are collected from someone other than the person ostensibly responsible for paying the taxes. In law, the terms may have different meanings. In U. S. constitutional law, for instance, direct taxes refer to poll taxes and property taxes, which are based on simple existence or ownership. A poll tax, head tax, or capitation is a Tax of a uniform fixed amount per individual (as opposed to a percentage of income Property tax, or millage tax, is an Ad valorem tax that an owner pays on the value of the property being taxed Indirect taxes are imposed on rights, privileges, and activities. Thus, a tax on the sale of property would be considered an indirect tax, whereas the tax on simply owning the property itself would be a direct tax. The distinction can be subtle between direct and indirect taxation, but can be important under the law.

Tax burden

Main article: Tax incidence

Law establishes from whom a tax is collected. In Economics, tax incidence is the analysis of the effect of a particular Tax on the distribution of economic welfare. In many countries, taxes are imposed on business (such as corporate taxes or portions of payroll taxes). Corporate tax refers to a Tax levied by various jurisdictions on the Profits made by companies or associations. Payroll tax generally refers to two kinds of taxes: Taxes which Employers are required to withhold from Employees Pay, also known as Withholding However, who ultimately pays the tax (the tax "burden") is determined by the marketplace as taxes become embedded into production costs. Taxes and subsidies have the effect of shifting the quantity and price of goods Depending on how quantities supplied and demanded vary with price (the "elasticities" of supply and demand), a tax can be absorbed by the seller (in the form of lower pre-tax prices), or by the buyer (in the form of higher post-tax prices). If the elasticity of supply is low, more of the tax will be paid by the supplier. If the elasticity of demand is low, more will be paid by the customer. And contrariwise for the cases where those elasticities are high. If the seller is a competitive firm, the tax burden flows back to the factors of production depending on the elasticities thereof; this includes workers (in the form of lower wages), capital investors (in the form of loss to shareholders), landowners (in the form of lower rents) and entrepreneurs (in the form of lower wages of superintendence). In economic theory factors of production (or productive inputs) are the resources employed to produce goods and services

To illustrate this relationship, suppose the market price of a product is US$1. The United States dollar ( sign: $; code: USD) is the unit of Currency of the United States; it has also been 00, and that a $0. 50 tax is imposed on the product that, by law, is to be collected from the seller. If the product is a luxury (in the economic sense of the term), a greater portion of the tax will be absorbed by the seller. For example, the seller might drop the price of the product to $0. 70 so that, after adding in the tax, the buyer pays a total of $1. 20, or $0. 20 more than he did before the $0. 50 tax was imposed. In this example, the buyer has paid $0. 20 of the $0. 50 tax (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). ^[9]

Morality

According to many political views, activities funded by taxes can be beneficial to society and progressive taxation can be used in modern nation-states to the benefit of the majority of the population and social development. Politics Politics is the process by which groups of people make decisions A society is a Population of Humans characterized by patterns of relationships between individuals that share a distinctive Culture and Institutions A progressive tax is a Tax imposed so that the Tax rate increases as the amount subject to taxation increases Social development redirects here For the aspect of Human biological development, see Psychosocial development Social change is a general term which ^[10] Most arguments about taxation revolve around the degree and method of taxation and associated government spending, not taxation itself. Government spending or government expenditure is classified by economists into three main types

Some people, however, argue that compulsory taxation itself is inherently immoral, as it is the theft of property by the government since people are forced to pay. Morality (from the Latin la moralitas "manner character proper behavior" has three principal meanings ^[11] These include objectivists, anarcho-capitalists and classical liberals. Anarcho-capitalism (also known as Free-market anarchism) is an individualist anarchist Political philosophy that advocates the elimination Classical liberalism (also known as traditional liberalism, Laissez-faire liberalism, Market liberalism or in much of the world

Government theft

Because payment of tax is usually compulsory and enforced by the police and justice system, some capitalist political philosophies view taxation by force as institutionalized violence equivalent to theft, accusing the government of levying taxes via coercive means. Capitalism is the Economic system in which the Means of production are owned by private Persons and operated for Profit and where Political philosophy is the study of questions about the City, Government, Politics, Liberty, Justice, Property, Rights In Criminal law, theft (also known as stealing or filching) is the illegal taking of another person's Property without that person's freely-given For the government of parliamentary systems see Executive (government. Coercion (co-er-shion is the practice of compelling a person or manipulating them to behave in an involuntary way (whether through action or inaction by use of threats Individualist anarchists, objectivists, anarcho-capitalists, and some libertarians see taxation as government aggression (see Zero Aggression Principle). Individualist anarchism refers to any of several traditions that hold that "individual conscience and the pursuit of self-interest should not be constrained by any collective Objectivism is a Philosophy developed by Ayn Rand in the 20th century that encompasses positions on Metaphysics, Epistemology, Anarcho-capitalism (also known as Free-market anarchism) is an individualist anarchist Political philosophy that advocates the elimination Libertarianism is a term used by a broad spectrum of political philosophies which prioritize individual Liberty and seek to minimize or even abolish the The non-aggression principle (also called the non-aggression axiom, anticoercion principle, or zero aggression principle) is a Deontological The libertarian writer Jason C. Reeher echoed the sentiments of Murray Rothbard on these grounds; in criticizing his local school district's relatively small property tax increase, Reeher said that "(t)he thief who steals the least is still a thief. Murray Newton Rothbard (March 2 1926 – January 7 1995 was an American economist of the Austrian School who helped define modern Libertarianism Property tax, or millage tax, is an Ad valorem tax that an owner pays on the value of the property being taxed " Under this view, taxes are paid individually and therefore, to be considered voluntary, in any meaningful way, should be levied only with the consent of the individual. Some libertarians recommend a minimal level of taxation in order to maximize the protection of liberty, while others prefer market alternatives such as private defense agencies, arbitration agencies or voluntary contributions. Liberty, the freedom to act or believe without being stopped by unnecessary force Sao Paulo Stock Exchangejpg|thumb| Virtual market arena where buyer and seller are not present and trade via intemediates and electronical information A private defense agency (PDA is a conceptualized agency that provides personal protection and military defense services voluntarily through the Free market. Arbitration, a form of Alternative dispute resolution (ADR is a legal technique for the resolution of Disputes outside the Courts wherein the Others claim that the examples where taxation and the state function of civil protection has collapsed and replaced by private defense agencies (such as in countries like Somalia), the results have been largely positive. Somalia ( Soomaaliya; الصومال) officially the Somali Republic ( Jamhuuriyadda Soomaaliya, جمهورية الصومال) and formerly known ^[12]

Democratic defense

One counter-argument is that in a democracy, because the government is the party performing the act of imposing taxes, society as a whole decides how the tax system should be organised. Democracy is a form of government in which the supreme power is held completely by the people under a free electoral system The American Revolution's "No taxation without representation" slogan implied this view. In this article the inhabitants of the thirteen colonies that supported the American Revolution are primarily referred to as "Americans" with occasional references to "Patriots" " No taxation without representation " began as a Slogan in the period 1763–1776 that summarized a primary grievance of the British Colonists The same argument could be made from a monarchist perspective: since the King embodies the nation, the nation as a whole decides how the tax system should be organised. Similar arguments can be made to justify taxation under any form of government, including dictatorships and oligarchies.

According to Ludwig von Mises, "society as a whole" should not make such decisions, due to methodological individualism. Ludwig Heinrich Edler von Mises (ˈluːtvɪç fɔn ˈmiːzəs ( September 29, 1881 – October 10, 1973) was an Austrian Methodological individualism is a philosophical method aimed at explaining and understanding broad society-wide developments as the aggregation of decisions by individuals ^[13] Under this view, the moral stature of an act, such as enslavement or theft is not contingent upon its legality or popularity, but rather its morality. As a social-economic system slavery is a legal institution under which a Person (called "a slave" is compelled to work for another The principle of legality is the legal ideal that requires all law to be clear ascertainable and non-retrospective Thomas Jefferson argued that, "A direct democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine. Thomas Jefferson (April 13 1743 – July 4 1826 was the third President of the United States (1801–1809 the principal author of the Declaration of Independence DIRECT is a proposal for a set of Shuttle Derived Launch Vehicles to be used for future Spaceflights Developed independently from NASA, DIRECT proposes Ochlocracy ( Greek: οχλοκρατία or okhlokratía; Latin: ochlocratia) is government by mob or a mass of people "^[14]

Land Tax defense

Advocates of land value taxation argue that sovereign rights over the products of labour and capital do not apply to land. Land value taxation (LVT (or site value taxation) is an Ad valorem tax where only the value of land itself is taxed John Locke wrote in Essay on Civil Government (1690) that: "When the sacredness of property is talked of, it should be remembered that any such sacredness does not belong in the same degree to landed property. John Locke (29 August 1632 – 28 October 1704 was an English Philosopher. " Henry George elaborated this to claim: "Here are two simple principles, both of which are self-evident: I. Henry George ( September 2, 1839 &ndash October 29, 1897) was an American Political economist and the most influential proponent of —That all men have equal rights to the use and enjoyment of the elements provided by Nature. II. —That each man has an exclusive right to the use and enjoyment of what is produced by his own labor" (Protection or Free Trade, 1886).

Justification

Defenders of taxation argue that taxation of business is justified on the grounds that the commercial activity necessarily involves use of publicly established and maintained economic infrastructure, and that businesses are in effect charged for this use. A business (also called firm or an enterprise) is a legally recognized organizational entity designed to provide goods and/or services to Compulsory taxation of individuals, such as income tax, is argued to be justified on similar grounds, including territorial sovereignty, and the social contract. Sovereignty is the exclusive Right to control a Government, a country, a people or oneself Social contract describes a broad class of republican theories whose subjects are implied agreements by which people form Nations and maintain a Social order A libertarian response is that government services used by people are either already paid for directly or are services that ought to be provided by a free market. Such taxes, they argue, are a way for the rulers to exploit the people.

History

Taxation levels

The first known system of taxation was in Ancient Egypt around 3000 BC - 2800 BC in the first dynasty of the Old Kingdom. Ancient Egypt was an Ancient Civilization in eastern North Africa, concentrated along the lower reaches of the Nile River in what is now The 30th century BC is a Century which lasted from the year 3000 BC to 2901 BC ^[15] Records from the time document that the pharaoh would conduct a biennial tour of the kingdom, collecting tax revenues from the people. Early taxation is also described in the Bible. Etymology According to the Online Etymology Dictionary, the word bible is from Latin biblia, traced from the same word through Medieval Latin and Late Latin In Genesis (chapter 47, verse 24 - the New International Version), it states "But when the crop comes in, give a fifth of it to Pharaoh. The New International Version is an English Translation of the Christian Bible. Pharaoh is the title given in modern parlance to the ancient Egyptian kings of all periods The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children. " Joseph was telling the people of Egypt how to divide their crop, providing a portion to the Pharaoh. Joseph or Yosef (יוֹסֵ Standard Yosef Tiberian Yôsēp̄, يوسف Yusuf; "He This article is about the country of Egypt For a topic outline on this subject see List of basic Egypt topics. A share (20%) of the crop was the tax.

In India, Islamic rulers imposed jizya starting in the 11th century. India, officially the Republic of India (भारत गणराज्य inc-Latn Bhārat Gaṇarājya; see also other Indian languages) is a country Under Islamic law, jizya or jizyah (جزْية ʤɪzjæh Ottoman Turkish: cizye both derived from Pahlavi and ultimately from Aramaic It was abolished by Akbar. Akbar redirects here For other uses see Akbar (disambiguation Jalaluddin Muhammad Akbar ( Jalāl ud-Dīn Muhammad Akbar Quite a few records of government tax collection in Europe since at least the 17th century are still available today. But taxation levels are hard to compare to the size and flow of the economy since production numbers are not as readily available. Government expenditures and revenue in France during the 17th century went from about 24. 30 million livres in 1600-10 to about 126. The livre tournois (" Tours pound " was one of numerous currencies used in France in the Middle Ages; and a money of 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. ^[16] Taxation as a percentage of production of final goods may have reached 15% - 20% during the 17th century in places like France, the Netherlands, and Scandinavia. This article is about the country For a topic outline on this subject see List of basic France topics. The Netherlands ( Dutch:, ˈnedərlɑnt is the European part of the Kingdom of the Netherlands, which consists of the Netherlands the Netherlands Terminology and usage As a cultural term "Scandinavia" has no official definition and is subject to usage by those who identify with the culture in question as well During the war-filled years of the eighteenth and early nineteenth century, tax rates in Europe increased dramatically as war became more expensive and governments became more centralized and adept at gathering taxes. This increase was greatest in England, Peter Mathias and Patrick O'Brien found that the tax burden increased by 85% over this period. Patrick O'Brien may refer to Patrick O'Brien (musician, American musician and lutenist Patrick O'Brien (footballer, Scottish footballer Another study confirmed this number, finding that per capita tax revenues had grown almost sixfold over the eighteenth century, but that steady economic growth had made the real burden on each individual only double over this period before the industrial revolution. Average tax rates were higher in Britain than France the years before the French Revolution, twice in per capita income comparison, but they were mostly placed on international trade. In a Tax system and in Economics, the tax rate describes the burden Ratio (usually expressed as a Percentage) at which a business or person is The French Revolution (1789–1799 was a period of political and social upheaval in the History of France, during which the French governmental structure previously an In France, taxes were lower but the burden was mainly on landowners, individuals, and internal trade and thus created far more resentment. ^[17]

Taxation as a percentage of GDP in 2003 was 56. 1% in Denmark, 54. The Kingdom of Denmark ( ˈd̥ænmɑɡ̊ (archaic ˈd̥anmɑːɡ̊ commonly known as Denmark, is a country in the Scandinavian region of northern Europe 5% in France, 49. This article is about the country For a topic outline on this subject see List of basic France topics. 0% in the Euro area, 42. Please update other articles as well to avoid contradiction within Wikipedia e 6% in the United Kingdom, 35. The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom, the UK or Britain,is a Sovereign state located 7% in the United States, 35. The United States of America —commonly referred to as the 2% in The Republic of Ireland, and among all OECD members an average of 40. Ireland ( Irish: Éire, ˈeːrʲə is a country in north-western Europe. 7%. ^[18][19]

Forms of taxation

In monetary economies prior to fiat banking, a critical form of taxation was seigniorage, the tax on the creation of money. Seigniorage (ˈseɪnjərɪdʒ '''''sei'''nY'Ridj'') also spelled seignorage or seigneurage, is the net Revenue derived from the issuing of

Other obsolete forms of taxation include:

• Scutage - paid in lieu of military service; strictly speaking a commutation of a non-tax obligation rather than a tax as such, but functioning as a tax in practice
• Tallage - a tax on feudal dependents
• Tithe - a tax-like payment (one tenth of one's earnings or agricultural produce), paid to the Church (and thus too specific to be a tax in strict technical terms). The tax of scutage or escuage, in the law of England under the Feudal system, allowed a knight to "buy out" of the military service due to the Tallage or talliage (from the French tailler ie a part cut out of the whole may have signified at first any Tax, but became in England and A tithe (from Old English teogoþa "tenth" is a one-tenth part of something paid as a (usually voluntary contribution or as a Tax or levy This should not be confused with the modern practice of the same name which is normally voluntary, although churches have sought it forcefully at times.
• Aids - During feudal times a feudal aid was a type of tax or due paid by a vassal to his lord.
• Danegeld - medieval land tax originally raised to pay off raiding Danes and later used to fund military expenditures. The Danegeld ("Danish tax" was a Tax raised to pay Tribute to the Viking raiders to save a land from being ravaged
• Carucage - tax which replaced the danegeld in England. Carucage was the name of a type of medieval taxation in England.
• Tax Farming - the principle of assigning the responsibility for tax revenue collection to private citizens or groups. Tax farming was originally a Roman practice whereby the burden of Tax collection was reassigned by the Roman State to private individuals or groups

Some principalities taxed windows, doors, or cabinets to reduce consumption of imported glass and hardware. Armoires, hutches, and wardrobes were employed to evade taxes on doors and cabinets. In extraordinary circumstances, taxes are also used to enforce public policy like congestion charge (to cut road traffic and encourage public transport) in London. In Tsarist Russia, taxes were clamped on beards. Today, one of the most complicated taxation-systems worldwide is in Germany. Three quarters of the world's taxation-literature refers to the German system. There are 118 laws, 185 forms, and 96,000 regulations, spending €3. Please update other articles as well to avoid contradiction within Wikipedia e 7 billion to collect the income tax. Today, governments of advanced economies of EU, North America, and others rely more on direct taxes, while those of developing economies of India, Africa, and others rely more on indirect taxes.

Tax rates

Main article: Tax rate

Taxes are most often levied as a percentage, called the tax rate. In a Tax system and in Economics, the tax rate describes the burden Ratio (usually expressed as a Percentage) at which a business or person is An important distinction when talking about tax rates is to distinguish between the marginal rate and the effective (average) rate. The effective rate is the total tax paid divided by the total amount the tax is paid on, while the marginal rate is the rate paid on the next dollar of income earned. For example, if income is taxed on a formula of 5% from $0 up to $50,000, 10% from $50,000 to $100,000, and 15% over $100,000, a taxpayer with income of $175,000 would pay a total of $18,750 in taxes.

Tax calculation

((0. 05*50,000) + (0. 10*50,000) + (0. 15*75,000)) = 18,750

The "effective rate" would be 10. 7%:

(18,750/175,000) = 0. 107

The "marginal rate" would be 15%.

Deadweight costs of taxation

For goods supplied in a perfectly competitive market, tax reduces economic efficiency, by introducing a deadweight loss. In Neoclassical economics and Microeconomics, perfect competition describes a market in which no buyer or seller has Market power. Economic efficiency is used to refer to a number of related concepts In Economics, a deadweight loss (also known as excess burden or allocative inefficiency) is a loss of economic efficiency that can occur when equilibrium In a perfect market, the price of a particular economic good adjusts to make sure that all trades which benefit both the buyer and the seller of a good occur. Price in Economics and Business is the result of an exchange and from that trade we assign a numerical Monetary value to a good, After introducing a tax, the price received by the seller is less than the cost to the buyer. This means that fewer trades occur and that the individuals or businesses involved gain less from participating in the market. This destroys value, and is known as the 'deadweight cost of taxation'.

The deadweight cost is dependent on the elasticity of supply and demand for a good. In Economics, elasticity is the ratio of the percent change in one variable to the percent change in another variable

Most taxes — including income tax and sales tax — can have significant deadweight costs. A sales tax is a Consumption tax charged at the Point of purchase for certain goods and services The only way to avoid deadweight costs in an economy which is generally competitive is to find taxes which do not change economic incentives, such as the Land value tax^[20], where the tax is on a good in completely inelastic supply, or a lump sum tax. In Economics, an incentive is any factor (financial or non-financial that provides a motive for a particular course of action or counts as a reason for preferring one choice Land value taxation (LVT (or site value taxation) is an Ad valorem tax where only the value of land itself is taxed A lump-sum tax is a Tax that is fixed in amount no matter what the change in circumstance of the taxed entity To do so is very difficult: the closest approximations are a poll tax paid by all adults regardless of their choices, or a windfall tax which is entirely unanticipated and so cannot affect decisions. A poll tax, head tax, or capitation is a Tax of a uniform fixed amount per individual (as opposed to a percentage of income In the United Kingdom, the Windfall Tax was a tax levied on privatised utility companies

Double dividend taxes

In some cases where the economy is not perfectly competitive, the existence of a tax can increase economic efficiency. If there is a negative externality associated with a good, meaning that it has negative effects not felt by the consumer, then the free market will trade too much of that good. In Economics, an externality is an impact on any party not directly involved in an economic decision By putting a tax on the good, the government can increase overall welfare as well as raising revenue in taxation. This is known as a 'double dividend'.

There are a wide range of goods where there is, or is claimed to be, a negative externality. Polluting fuels (like petrol), goods which incur public healthcare costs (such as alcohol or tobacco), and charges for existing 'free' public goods (like congestion charging) all offer the possibility of a double dividend. In Chemistry, an alcohol is any Organic compound in which a Hydroxyl group ( - O[[hydrogen H]]) is bound to a Carbon Tobacco is an Agricultural product recognized as an addictive drug processed from the fresh Leaves of plants in the genus Nicotiana. Road pricing is an economic concept regarding the various direct charges applied for the use of Roads The road charges includes Fuel taxes licence fees This type of tax is a Pigovian tax, sometimes colloquially known as a 'sin tax'. A Pigovian tax (also spelled Pigouvian tax) is a Tax levied to correct the negative externalities of a market activity A Pigovian tax (also spelled Pigouvian tax) is a Tax levied to correct the negative externalities of a market activity It is worthwhile noting that taxation is not necessarily the only, or the best, method of dealing with negative externalities.

Optimal taxation theory

Most governments need revenue which exceeds that which can be provided by non-distortionary taxes or through taxes which give a double dividend. Optimal taxation theory is the branch of economics that considers how taxes can be structured to give the least deadweight costs, or to give the best outcomes in terms of social welfare. "Social welfare" redirects here For other uses see Welfare A social welfare provision refers to any program which seeks to provide

Ramsey optimal taxation deals with minimising deadweight costs. Because deadweight costs are related to the elasticity of supply and demand for a good, it follows that putting the highest tax rates on the goods for which there is most inelastic supply and demand will result in the least overall deadweight costs. In Economics, elasticity is the ratio of the percent change in one variable to the percent change in another variable

Some economists have sought to integrate optimal tax theory with the social welfare function, which is the economic expression of the idea that equality is valuable to a greater or lesser extent. In economics a social welfare function can be defined as a real-valued function that ranks conceivable social states (alternative complete descriptions of the society If individuals experience diminishing returns from income, then the optimum distribution of income for society involves a progressive income tax. In Economics, diminishing returns is also called diminishing marginal returns or the law of diminishing returns. Mirrlees optimal income tax is a detailed theoretical model of the optimum progressive income tax along these lines.

Over the last years the validity of the theory of optimal taxation was discussed by many political economists. Canegrati (2007) demonstrated that if we move from the assumption that governments do not maximise the welfare of society but the probability of winning elections, in equilibrium tax rates are lower for the most powerful groups of society (and not for the poorest as in the optimal theory of direct taxation developed by Atkinson and Stiglitz). Joseph Eugene Stiglitz (born February 9, 1943) is an American Economist and a professor at Columbia University.

Transparency and simplicity

Another concern is that the complicated tax codes of developed economies offer perverse economic incentives. In Economics, an incentive is any factor (financial or non-financial that provides a motive for a particular course of action or counts as a reason for preferring one choice The more details of tax policy there are, the more opportunities for legal tax avoidance and illegal tax evasion; these not only result in lost revenue, but involve additional deadweight costs: for instance, payments made for tax advice are essentially deadweight costs because they add no wealth to the economy. Tax avoidance is the legal utilization of the Tax regime to one's own advantage in order to reduce the amount of tax that is payable by means that are within the law Tax avoidance is the legal utilization of the Tax regime to one's own advantage in order to reduce the amount of tax that is payable by means that are within the law Perverse incentives also occur because of non-taxable 'hidden' transactions; for instance, a sale from one company to another might be liable for sales tax, but if the same goods were shipped from one branch of a corporation to another, no tax would be payable. A sales tax is a Consumption tax charged at the Point of purchase for certain goods and services

To address these issues, economists often suggest simple and transparent tax structures which avoid providing loopholes. Sales tax, for instance, can be replaced with a value added tax which disregards intermediate transactions. Value added tax ( VAT) or goods and services tax ( GST) is a consumption Tax levied on value added.

Economics of tax incidence

Economic theory suggests that the economic effect of tax does not necessarily fall at the point where it is legally levied. For instance, a tax on employment paid by employers will impact on the employee, at least in the long run. The greatest share of the tax burden tends to fall on the most inelastic factor involved - the part of the transaction which is affected least by a change in price. So, for instance, a tax on wages in a town will (at least in the long run) affect property-owners in that area.

Costs of compliance

Although governments must spend money on tax collection activities, some of the costs, particularly for keeping records and filling out forms, are borne by businesses and by private individuals. These are collectively called costs of compliance. More complex tax systems tend to have higher costs of compliance. This fact can be used as the basis for practical or moral arguments in favor of tax simplification (see, for example, FairTax), or tax elimination (in addition to moral arguments described above). The FairTax is a proposed change to the federal tax laws of the United States that would replace all federal income taxes with a single national retail

Kinds of taxes

The Organisation for Economic Co-operation and Development (OECD) publishes perhaps the most comprehensive analysis of worldwide tax systems. In order to do this it has created a comprehensive categorisation of all taxes in all regimes which it covers:^[21]

Ad valorem

Main article: Ad valorem

An ad valorem tax is one where the tax base is the value of a good, service, or property. An ad valorem tax ( Latin: according to value) is a Tax based on the value of Real estate or Personal property. Sales taxes, tariffs, property taxes, inheritance taxes, and value added taxes are different types of ad valorem tax. An ad valorem tax is typically imposed at the time of a transaction (sales tax or value added tax (VAT)) but it may be imposed on an annual basis (property tax) or in connection with another significant event (inheritance tax or tariffs). An alternative to ad valorem taxation is an excise tax, where the tax base is the quantity of something, regardless of its price. For example, in the United Kingdom, a tax is collected on the sale of alcoholic drinks that is calculated by volume and beverage type, rather than the price of the drink. The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom, the UK or Britain,is a Sovereign state located

Environment Affecting Tax

This includes natural resources consumption tax, GreenHouse gas tax (Carbon tax, "sulfuric tax", etc), and others. Natural resources consumption tax is a kind of Tax to help to ensure the long run Sustainability by making people be more aware of the Natural resources A carbon tax is an environmental Tax on emissions of Carbon dioxide and other Greenhouse gases It is an example of a pollution tax. see Ecotax, Gas-guzzler, and Polluter pays principle for more information. Ecotax, short for Ecological taxation, can refer to A policy that introduces taxes intended to promote ecologically sustainable activities via economic incentives Gas-guzzler commonly refers to a vehicle that makes inefficient use of Fuel. The Polluter Pays Principle is a principle in Environmental law where the polluting party pays for the damage done to the Natural environment.

Capital gains tax

Main article: Capital gains tax

A capital gains tax is the tax levied on the profit released upon the sale of a capital asset. A capital gains tax (abbreviated CGT) is a Tax charged on Capital gains the profit realized on the sale of a non-inventory Asset that was purchased In many cases, the amount of a capital gain is treated as income and subject to the marginal rate of income tax. However, in an inflationary environment, capital gains may be to some extent illusory: if prices in general have doubled in five years, then selling an asset for twice the price it was purchased for five years earlier represents no gain at all. Partly to compensate for such changes in the value of money over time, some jurisdictions, such as the United States, give a favorable capital gains tax rate based on the length of holding. The United States of America —commonly referred to as the European jurisdictions have a similar rate reduction to nil on certain property transactions that qualify for the participation exemption. In Canada, 50% of the gain is taxable income. In India, Short Term Capital Gains Tax (arising before 1 year) is 10% flat rate of the gains and Long Term Capital Gains Tax is nil for stocks & mutual fund units held 1 year or more and 20% for any other assets held 3 years or more. If such a tax is levied on inherited property, it can act as a de facto probate or inheritance tax.

Consumption tax

Main article: Consumption tax

A consumption tax is a tax on non-investment spending, and can be implemented by means of a sales tax or by modifying an income tax to allow for unlimited deductions for investment or savings. A consumption tax is a Tax on the income or expenditure for goods and services

Corporation tax

Main article: Corporate tax

Corporate tax refers to a direct tax levied by various jurisdictions on the profits made by companies or associations and often includes capital gains of a company. Corporate tax refers to a Tax levied by various jurisdictions on the Profits made by companies or associations. Generally a company is a form of Business organization. The precise definition varies Earnings are generally considered gross revenue less expenses. Corporate expenses that relate to capital expenditures are usually deducted in full (for example, trucks are fully deductible in the Canadian tax system, while a corporate sports car is only partly deductible). They are often deducted over the useful life of the asset purchase. Notably, accounting rules about deductible expenses and tax rules about deductible expense will differ at times, giving rise to book-tax differences. If the book-tax difference is carried over more than a year, it is referred to as a temporary difference, which then creates deferred tax assets and liabilities for the corporation, which are carried on the balance sheet. Deferred tax is an Accounting concept meaning a future tax Liability or Asset, resulting from temporary differences between book (accounting In Financial accounting, a balance sheet or statement of financial position is a summary of a person's or organization's balances

See also: Excess profits tax, Windfall profits tax

Excises

Main article: Excise

Unlike an ad valorem, an excise is not a function of the value of the product being taxed. An excess profits tax is a tax on any Profit above a certain amount A windfall profits tax is a higher Tax rate on profits that ensue from a sudden Windfall gain to a particular company or Industry. Excise or Excise tax (sometimes called an excise duty) is a type of Tax charged on goods produced within the country (as opposed to Customs duties Excise taxes are based on the quantity, not the value, of product purchased. For example, in the United States, the Federal government imposes an excise tax of 18. 4 cents per US gallon (4. 86¢/L) of gasoline, while state governments levy an additional 8 to 28 cents per US gallon. Excises on particular commodities are frequently hypothecated. See also Hypothec. The original use of the word hypothecation was for a pledge of property as collateral for a Debt without For example, a fuel excise (use tax) is often used to pay for public transportation, especially roads and bridges and for the protection of the environment. A fuel tax (also known as a petrol tax, gasoline tax, gas tax or fuel duty) is a Sales tax imposed on the sale of Fuel. A use tax is a type of Excise tax levied in the United States. A road is an identifiable route, way or path between two or more places. A bridge is a Structure built to span a Gorge, Valley, Road, railroad track, River, Body of water A special form of hypothecation arises where an excise is used to compensate a party to a transaction for alleged uncontrollable abuse; for example, a blank media tax is a tax on recordable media such as CD-Rs, whose proceeds are typically allocated to copyright holders. A private copying levy (also known as blank media tax or levy) is a Government -mandated scheme in which a special Tax or Levy (additional A CD-R ( C ompact D isc- R ecordable is a variation of the Compact Disc invented by Philips and Sony. Copyright is a legal concept enacted by Governments, giving the creator of an original work of authorship Exclusive rights to control its distribution usually for Critics charge that such taxes blindly tax those who make legitimate and illegitimate usages of the products; for instance, a person or corporation using CD-R's for data archival should not have to subsidize the producers of popular music.

Excises (or exemptions from them) are also used to modify consumption patterns (social engineering). Social engineering is a concept in Political science that refers to efforts to influence popular Attitudes and Social behavior on a large scale whether For example, a high excise is used to discourage alcohol consumption, relative to other goods. This may be combined with hypothecation if the proceeds are then used to pay for the costs of treating illness caused by alcohol abuse. Similar taxes may exist on tobacco, pornography, etc. Tobacco is an Agricultural product recognized as an addictive drug processed from the fresh Leaves of plants in the genus Nicotiana. Pornography or porn is the explicit depiction of Sexual subject matter with the sole intention of sexually exciting the viewer , and they may be collectively referred to as "sin taxes". A Pigovian tax (also spelled Pigouvian tax) is a Tax levied to correct the negative externalities of a market activity A carbon tax is a tax on the consumption of carbon-based non-renewable fuels, such as petrol, diesel-fuel, jet fuels, and natural gas. A carbon tax is an environmental Tax on emissions of Carbon dioxide and other Greenhouse gases It is an example of a pollution tax. The object is to reduce the release of carbon into the atmosphere. In the United Kingdom, vehicle excise duty is an annual tax on vehicle ownership. Vehicle Excise Duty (VED is a British Excise duty, which has to be paid to acquire a Vehicle licence for most types of Motor vehicle.

Income tax

Main article: Income Tax

An income tax is a tax levied on the financial income of persons, corporations, or other legal entities. Income, refers to consumption opportunity gained by an entity within a specified time frame which is generally expressed in monetary terms Various income tax systems exist, with varying degrees of tax incidence. In Economics, tax incidence is the analysis of the effect of a particular Tax on the distribution of economic welfare. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or corporation tax. Corporate tax refers to a Tax levied by various jurisdictions on the Profits made by companies or associations. Individual income taxes often tax the total income of the individual (with some deductions permitted), while corporate income taxes often tax net income (the difference between gross receipts, expenses, and additional write-offs).

The "tax net" refers to the types of payment that are taxed, which included personal earnings (wages), capital gains, and business income. A wage is a compensation workers receive in exchange for their labor. The rates for different types of income may vary and some may not be taxed at all. Capital gains may be taxed when realized (e. g. when shares are sold) or when incurred (e. g. when shares appreciate in value). Business income may only be taxed if it is significant or based on the manner in which it is paid. Some types of income, such as interest on bank savings, may be considered as personal earnings (similar to wages) or as a realized property gain (similar to selling shares). In some tax systems, personal earnings may be strictly defined where labor, skill, or investment is required (e. g. wages); in others, they may be defined broadly to include windfalls (e. g. gambling wins).

Personal income tax is often collected on a pay-as-you-earn basis, with small corrections made soon after the end of the tax year. For other uses see Paye (disambiguation PAYE ( Pay As You-Earn) is an amount collected by Employers on behalf of the government A fiscal year (or financial year, or sometimes budget year) is a period used for calculating annual ("yearly" Financial statements in Businesses These corrections take one of two forms: payments to the government, for taxpayers who have not paid enough during the tax year; and tax refunds from the government for those who have overpaid. A tax refund or tax rebate is a refund on Taxes when the tax liability is less than the taxes paid Income tax systems will often have deductions available that lessen the total tax liability by reducing total taxable income. They may allow losses from one type of income to be counted against another. For example, a loss on the stock market may be deducted against taxes paid on wages. Other tax systems may isolate the loss, such that business losses can only be deducted against business tax by carrying forward the loss to later tax years.

Inheritance tax

Main article: Inheritance tax

Inheritance tax, estate tax, and death tax or duty are the names given to various taxes which arise on the death of an individual. Estate tax and Death duty redirect here Inheritance tax, estate tax and death duty are the names given to various taxes which In United States tax law, there is a distinction between an estate tax and an inheritance tax: the former taxes the personal representatives of the deceased, while the latter taxes the beneficiaries of the estate. However, this distinction does not apply in other jurisdictions; for example, if using this terminology UK inheritance tax would be an estate tax.

See also: Allodial, Pigovian tax, Estate tax (United States), Inheritance Tax (United Kingdom). Allodial title is a concept in some systems of property law It describes a situation where Real property ( Land, Buildings and Fixtures) is owned A Pigovian tax (also spelled Pigouvian tax) is a Tax levied to correct the negative externalities of a market activity The estate tax in the United States is a Tax imposed on the transfer of the "taxable estate " of a deceased person whether such property is transferred In the United Kingdom, Inheritance Tax was first introduced as a tax on estates in England and Wales over a certain value from 1796 then called legacy succession

Poll tax

Main article: Poll tax

A poll tax, also called a per capita tax, or capitation tax, is a tax that levies a set amount per individual. A poll tax, head tax, or capitation is a Tax of a uniform fixed amount per individual (as opposed to a percentage of income One of the earliest taxes mentioned in the Bible of a half-shekel per annum from each adult Jew (Ex. Etymology According to the Online Etymology Dictionary, the word bible is from Latin biblia, traced from the same word through Medieval Latin and Late Latin 30:11-16) was a form of poll tax. Poll taxes are administratively cheap because they are easy to compute and collect and difficult to cheat. Economists have considered poll taxes economically efficient because people are presumed to be in fixed supply. However, poll taxes are very unpopular because poorer people pay a higher proportion of their income than richer people. In addition, the supply of people is in fact not fixed over time: on average, couples will choose to have fewer children if a poll tax is imposed. The introduction of a poll tax in medieval England was the primary cause of the 1381 Peasants' Revolt, and in England and Wales in 1990 the change from a progressive local taxation based on property values to a single-rate form of taxation regardless of ability to pay (the Community Charge, but more popularly referred to as the Poll Tax). The Community Charge, popularly known as the " poll tax " was a system of taxation introduced in replacement of the rates to part fund Local government A poll tax, head tax, or capitation is a Tax of a uniform fixed amount per individual (as opposed to a percentage of income

Property tax

Main article: Property tax

A property tax is a tax imposed on property by reason of its ownership. Property tax, or millage tax, is an Ad valorem tax that an owner pays on the value of the property being taxed A property tax is usually levied on the value of property owned. There are three species of property: land, improvements to land (immovable man-made things, e. g. buildings) and personal property (movable things). Real estate or realty is the combination of land and improvements to land.

Property taxes may be charged on a recurrent basis (e. g. , yearly). A common type of property tax is an annual charge on the ownership of real estate, where the tax base is the estimated value of the property. Real estate is a legal term (in some jurisdictions notably in the USA, United Kingdom For a period of over 150 years from 1695 a window tax was levied in England, with the result that one can still see listed buildings with windows bricked up in order to save their owners money. The window tax was a Glass tax which was a significant social cultural and architectural force in the kingdoms of England, Scotland and then Great A listed building in the United Kingdom is a building or other structure officially designated as being of special architectural historical or cultural significance A similar tax on hearths existed in France and elsewhere, with similar results. The two most common type of event driven property taxes are stamp duty, charged upon change of ownership, and inheritance tax, which is imposed in many countries on the estates of the deceased. Stamp duty is a form of Tax that is levied on documents Historically a physical stamp (a Tax stamp) had to be attached to or impressed upon the document to denote Estate tax and Death duty redirect here Inheritance tax, estate tax and death duty are the names given to various taxes which

In contrast with a tax on real estate (land and buildings), a land value tax is levied only on the unimproved value of the land ("land" in this instance may mean either the economic term, i. Land value taxation (LVT (or site value taxation) is an Ad valorem tax where only the value of land itself is taxed e. , all natural resources, or the natural resources associated with specific areas of the earth's surface: "lots" or "land parcels").

When real estate is held by a higher government unit or some other entity not subject to taxation by the local government, the taxing authority may receive a payment in lieu of taxes to compensate it for some or all of the foregone tax revenue. A PILOT is a payment in lieu of taxes (also sometimes abbreviated "PILT" made to compensate a local government for some or all of the Tax revenue that

In many jurisdictions (including many American states), there is a general tax levied periodically on residents who own personal property (personalty) within the jurisdiction. Personal property is a type of Property. In the Common law systems personal property may also be called chattels or personalty. Vehicle and boat registration fees are subsets of this kind of tax. The tax is often designed with blanket coverage and large exceptions for things like food and clothing. Household goods are often exempt when kept or used within the household. Any otherwise non-exempt object can lose its exemption if regularly kept outside the household. Thus, tax collectors often monitor newspaper articles for stories about wealthy people who have lent art to museums for public display, because the artworks have then become subject to personal property tax. If an artwork had to be sent to another state for some touch-ups, it may have become subject to personal property tax in that state as well.

Retirement tax

Some countries with social security systems, which provide income to retired workers, fund those systems with specific dedicated taxes. Social security primarily refers to a Social insurance program providing social protection or protection against socially recognized conditions including poverty old These often differ from comprehensive income taxes in that they are levied only on specific sources of income, generally wages and salary (in which case they are called payroll taxes). Payroll tax generally refers to two kinds of taxes: Taxes which Employers are required to withhold from Employees Pay, also known as Withholding A further difference is that the total amount of the taxes paid by or on behalf of a worker is typically considered in the calculation of the retirement benefits to which that worker is entitled. Examples of retirement taxes include the FICA tax, a payroll tax that is collected from employers and employees in the United States to fund the country's Social Security system; and the National Insurance Contributions (NICs) collected from employers and employees in the United Kingdom to fund the country's national insurance system. The Federal Insurance Contributions Act (FICA tax ( is a United States payroll (or employment Tax imposed by the federal government on both employees The United States of America —commonly referred to as the Social Security, in the United States currently refers to the federal Old-Age Survivors and Disability Insurance ( OASDI) program National Insurance (NI is a system of taxes and related Social security benefits in the United Kingdom. The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom, the UK or Britain,is a Sovereign state located National Insurance (NI is a system of taxes and related Social security benefits in the United Kingdom.

These taxes are sometimes regressive in their immediate effect. For example, in the United States, each worker, whatever his or her income, pays at the same rate up to a specified cap, but income over the cap is not taxed. A further regressive feature is that such taxes often exclude investment earnings and other forms of income that are more likely to be received by the wealthy. The regressive effect is somewhat offset, however, by the eventual benefit payments, which typically replace a higher percentage of a lower-paid worker's pre-retirement income.

Sales tax

Main article: Sales tax

Sales taxes are a form of excise levied when a commodity is sold to its final consumer. A sales tax is a Consumption tax charged at the Point of purchase for certain goods and services Retail organizations contend that such taxes discourage retail sales. The question of whether they are generally progressive or regressive is a subject of much current debate. People with higher incomes spend a lower proportion of them, so a flat-rate sales tax will tend to be regressive. It is therefore common to exempt food, utilities and other necessities from sales taxes, since poor people spend a higher proportion of their incomes on these commodities, so such exemptions would make the tax more progressive. This is the classic "You pay for what you spend" tax, as only those who spend money on non-exempt (i. e. luxury) items pay the tax.

A small number of US states rely entirely on sales taxes for state revenue, as those states do not levy a state income tax. Such states tend to have a moderate to large amount of tourism or inter-state travel that occurs within their borders, allowing the state to benefit from taxes from people the state would otherwise not tax. In this way, the state is able to reduce the tax burden on its citizens. The US states that do not levy a state income tax are Alaska, Tennessee, Florida, Nevada, South Dakota, Texas,^[23] Washington state, and Wyoming. Additionally, New Hampshire and Tennessee levy state income taxes only on dividends and interest income. Of the above states, only Alaska and New Hampshire do not levy a state sales tax. Additional information can be obtained at the Federation of Tax Administrators website.

In the United States, there is a growing movement for the replacement of all federal payroll and income taxes (both corporate and personal) with a national retail sales tax and monthly tax rebate to households of citizens and legal resident aliens. The tax proposal is named FairTax. The FairTax is a proposed change to the federal tax laws of the United States that would replace all federal income taxes with a single national retail In Canada, the federal sales tax is called the Goods and Services tax (GST) and now stands at 5%. The provinces of British Columbia, Saskatchewan, Manitoba, Ontario and Prince Edward Island also have a provincial sales tax [PST]. The provinces of Nova Scotia, New Brunswick, and Newfoundland & Labrador have harmonized their provincial sales taxes with the GST - Harmonized Sales Tax [HST]. The province of Quebec collects the Quebec Sales Tax [QST] which is based on the GST with certain differences. Most businesses can claim back the GST, HST and QST they pay, and so effectively it is the final consumer who pays the tax.

Tariffs

Main article: Tariff

An import or export tariff (also called customs duty or impost) is a charge for the movement of goods through a political border. For other uses of this word see Tariff (disambiguation. A tariff is a tax imposed on goods when they are moved across a political boundary Tariffs discourage trade, and they may be used by governments to protect domestic industries. Trade is the willing exchange of goods, services, or both Trade is also called Commerce. A proportion of tariff revenues is often hypothecated to pay government to maintain a navy or border police. The classic ways of cheating a tariff are smuggling or declaring a false value of goods. Smuggling, also known as trafficking, is the clandestine transportation of goods or persons past a point where prohibited such as out of a building into a Prison Tax, tariff and trade rules in modern times are usually set together because of their common impact on industrial policy, investment policy, and agricultural policy. The tax tariff and trade laws of a political region State or Trade bloc determine which forms of consumption and production tend to be encouraged An industrial policy is any government regulation or law that encourages the ongoing operation of or investment in a particular industry An investment policy is any government regulation or law that encourages or discourages foreign investment in the local economy e Agricultural policy describes a set of laws relating to domestic Agriculture and imports of foreign agricultural products A trade bloc is a group of allied countries agreeing to minimize or eliminate tariffs against trade with each other, and possibly to impose protective tariffs on imports from outside the bloc. A trade bloc is a large Free trade area formed by one or more Tax tariff and trade agreements A customs union has a common external tariff, and, according to an agreed formula, the participating countries share the revenues from tariffs on goods entering the customs union. A customs union is a Free trade area with a Common external tariff.

Toll

Main articles: Toll road, Toll bridge, and Toll tunnel

A toll is a tax or fee charged to travel via a road, bridge, tunnel or other route. A toll road, (also known as a tollway, turnpike, pike, or toll highway, especially if it is constructed to Freeway standards A toll bridge is a Bridge over which Traffic may pass upon payment of a fee or toll. A toll tunnel is a special road Tunnel whose construction and/or maintenance costs are in part recouped through a Toll charged for passing through it A toll road, (also known as a tollway, turnpike, pike, or toll highway, especially if it is constructed to Freeway standards A toll bridge is a Bridge over which Traffic may pass upon payment of a fee or toll. A toll tunnel is a special road Tunnel whose construction and/or maintenance costs are in part recouped through a Toll charged for passing through it Historically tolls have been used to pay for state bridge, road and tunnel projects. They have also been used in privately constructed transport links. The toll is likely to be a fixed charge, possibly graduated for vehicle type, or for distance on long routes.

Shunpiking is the practice of finding another route to avoid payment of tolls. The term shunpiking comes from the word shun, meaning "to avoid" and pike, a term referring to Turnpikes which were roads which required In some situations where tolls were increased or felt to be unreasonably high, informal shunpiking by individuals escalated into a form of boycott by regular users, with the goal of applying the financial stress of lost toll revenue to the authority determining the levy. A boycott is a form of Consumer activism involving the act of voluntarily abstaining from using buying or dealing with someone or some other organization as an expression of

Transfer tax

Main article: Transfer tax

Historically, in many countries, a contract needed to have a stamp affixed to make it valid. A transfer tax is a tax on the passing of Title to Property from one person (or entity to another The charge for the stamp was either a fixed amount or a percentage of the value of the transaction. In most countries the stamp has been abolished but stamp duty remains. Stamp duty is a form of Tax that is levied on documents Historically a physical stamp (a Tax stamp) had to be attached to or impressed upon the document to denote Stamp duty is levied in the UK on the purchase of shares and securities, the issue of bearer instruments, and certain partnership transactions. Its modern derivatives, stamp duty reserve tax and stamp duty land tax, are respectively charged on transactions involving securities and land. Stamp duty is a form of Tax that is levied on documents Historically a physical stamp (a Tax stamp) had to be attached to or impressed upon the document to denote In the United Kingdom, Stamp duty is a form of tax charged on instruments (that is written documents and requires a physical stamp to be attached to or impressed upon the Stamp duty has the effect of discouraging speculative purchases of assets by decreasing liquidity. In the US transfer tax is often charged by the state or local government and (in the case of real property transfers) can be tied to the recording of the deed or other transfer documents. The United States of America —commonly referred to as the Taxes on currency transactions are known as Tobin taxes. A Tobin tax is the suggested Tax on all Trade of Currency across borders

See also: Stamp duty

Value Added Tax / Goods and Services Tax

Main article: Value added tax

A value added tax (VAT), also known as 'Goods and Services Tax' (G. Stamp duty is a form of Tax that is levied on documents Historically a physical stamp (a Tax stamp) had to be attached to or impressed upon the document to denote Value added tax ( VAT) or goods and services tax ( GST) is a consumption Tax levied on value added. S. T), or 'Impuesto Indirecto sobre la Prestacion de Servicios' (I. S. I. ), Single Business Tax, or Turnover Tax in some countries, applies the equivalent of a sales tax to every operation that creates value. To give an example, sheet steel is imported by a machine manufacturer. That manufacturer will pay the VAT on the purchase price, remitting that amount to the government. The manufacturer will then transform the steel into a machine, selling the machine for a higher price to a wholesale distributor. The manufacturer will collect the VAT on the higher price, but will remit to the government only the excess related to the "value added" (the price over the cost of the sheet steel). The wholesale distributor will then continue the process, charging the retail distributor the VAT on the entire price to the retailer, but remitting only the amount related to the distribution mark-up to the government. The last VAT amount is paid by the eventual retail customer who cannot recover any of the previously paid VAT. For a VAT and sales tax of identical rates, the total tax paid is the same, but it is paid at differing points in the process.

VAT is usually administrated by requiring the company to complete a VAT return, giving details of VAT it has been charged (referred to as input tax) and VAT it has charged to others (referred to as output tax). The difference between output tax and input tax is payable to the Local Tax Authority. If input tax is greater than output tax the company can claim back money from the Local Tax Authority. VAT was historically used to counter evasion in a sales tax or excise. Tax avoidance is the legal utilization of the Tax regime to one's own advantage in order to reduce the amount of tax that is payable by means that are within the law By collecting the tax at each production level, the theory is that the entire economy helps in the enforcement. However, forged invoices and similar evasion methods have demonstrated that there are always those who will attempt to evade taxation.

Economic theorists have argued that the collection process of VAT minimises the market distortion resulting from the tax, compared to a sales tax. However, VAT is held by some to discourage production.

Wealth (net worth) tax

Main article: Wealth tax

Some countries' governments will require declaration of the tax payers' balance sheet (assets and liabilities), and from that exact a tax on net worth (assets minus liabilities), as a percentage of the net worth, or a percentage of the net worth exceeding a certain level. Because of the broad term "wealth" Property tax, capital transfer taxes ( Inheritance tax, Estate tax, Gift tax) Endowment tax In Financial accounting, a balance sheet or statement of financial position is a summary of a person's or organization's balances For the film entitled Net Worth see Net Worth (film. In business net worth (sometimes called net assets) is the total Assets The tax is in place for both "natural" and in some cases legal "persons". In Jurisprudence, a natural person is a human being perceptible through the senses and subject to physical laws as opposed to an artificial legal or juristic person Note This Wikipedia entry deals with the legal concept legal person.

See also

• Deficit
• Deposit Interest Retention Tax
• Dividend tax
• Extortion - Civilized taxation gradually evolved out of primitive tribal extortion (e. A budget deficit occurs when an Entity (often a Government) spends more Money than it takes in Deposit Interest Retention Tax ( DIRT) is a form of Tax on Interest earned on bank accounts in Republic of Ireland that was first introduced in A dividend tax is an Income tax on dividend payments to the Stockholders (shareholders of a company Extortion, outwresting, or exaction is a criminal offense, which occurs when a person Unlawfully obtains either money property or services g. , Viking Danegeld)
• Fiscal neutrality
• Fiscal incidence
• Government debt
• Government spending
• Optimal tax
• Public finance
• Revenue On-Line Service
• Solidarity tax on wealth in France
• Tax avoidance and tax evasion
• Tax exemption
• Tax fraud
• Tax Freedom Day
• Tax incentive
• Tax incidence
• Tax law
• Tax policy
• Tax relief
• Tax resistance
• Tax shelter
• Tax haven
• Voluntary taxation
• Wealth tax
• Zero Aggression Principle

By country or region

• Tax rates around the world
• List of countries by tax revenue as percentage of GDP
• Taxation in Australia
• Taxation in Canada
• Taxation in Colombia
• Taxation in France
• Taxation in Germany
• Taxation in Hong Kong
• Taxation in India
• Taxation in Indonesia
• Taxation in the Netherlands
• Taxation in New Zealand
• Taxation in the Republic of Ireland
• Taxation in Russia
• Taxation in Singapore
• Taxation in the United Kingdom
• Taxation in the United States
• Taxation in the European Union

Notes

External links

• WikiCPA.com tax articles
• Wikinvestopedia Tax Glossary
• Tax Rates and Tax Revenue by Seth J. Chandler and Per Unit Tax by Fiona Maclachlan, The Wolfram Demonstrations Project.

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