A tax is a compulsory financial obligation or any sort of levy enforced on a taxpayer (independent or legal entity) by a government agency to cover government expenses and various public expenditures. As you will find on ReviewsBird.com, several organizations serve as tax agencies. Failure to pay, along with tax evasion or refusal, is punishable by law.
From an economic point of view, taxation moves wealth from individuals or companies to the government. This has consequences that can both increase and decrease economic development and economic welfare. Taxation is therefore a widely discussed subject.
The legal definition and economic definition of taxation vary in several aspects, such as that certain payments to governments are not considered by economists as taxes. For instance, certain transfers to the public sector are similar to prices. Examples include public higher education and utility fees made available by local governments.
In the opinion of economists, a tax is a non-penal but obligatory movement of capital from the private sector to the public sector imposed based on predetermined requirements and without reference to the real benefit gained. In modern taxation policies, governments impose taxes on money but in-kind and corvée taxes are typical of conventional or pre-capitalist states and their practical counterparts. The tax system and the government’s increased tax expenditure are also widely discussed in politics and economics.
Tax collecting in the US is carried out by the Internal Revenue Service (IRS).
The different types of taxation that apply to all types of levies include:
- Income tax: Governments levy income taxes on monetary income earned by all individuals and corporations under their jurisdiction. Generally, the regulators levy a tax on net company income, net earnings and other income.
- Corporate tax: Corporate tax extends to capital tax, income tax or other taxation levied on corporations.
- Capital gains: Capital gains tax is levied on all capital gains or profits gained by individuals or companies from the sale of certain assets, including shares, bonds or real estate.
- Property tax: Property tax is paid for by the owner of the property to the local authority. This tax is determined based on the value of property and land.
- Inheritance: A type of tax levied on people who inherit the properties of a deceased person.
- Sales tax: This is the consumption tax levied on the sale of goods and services by the government. This can be through Value Added Tax (VAT), Excise Tax, Goods and Services Tax (GST), or Provincial Sales Tax.
Importance in Society
The government’s fiscal capacity influences the economy. Tax imposition is intended to raise revenue for funding governance or changing prices to influence demand. Throughout history, states and their practical counterparts have used the money generated by taxes to perform various tasks. Some of these include military and defense, commercial infrastructure, scientific research, education and the arts, transportation and the running of the government itself.
The purpose of taxation is to preserve the value of the currency, to convey public policy on the allocation of resources and to subsidize certain sectors or demographic groups or to separate the costs of certain benefits.