A tax is an obligatory annual financial liability or any other sort of tax levied on a taxpayer by an agency of government so as to fund various public expenditures and government investment. Evasion of or refusal to pay tax, and punishment for failure to comply with tax laws, is legally punishable by the government. Tax administration is a crucial but neglected area of government expenditure management. While correct identification, collection and processing of taxes can help the administration achieve its objectives, a complete understanding of the impact of tax on economic decisions is important for the administration to ensure appropriate tax collections and administrative efficiencies.
Many types of taxes are imposed on individuals and businesses. The major categories are: General Excise Taxes, Sales Tax, Import and Exports Tax, Property Tax, Franchise Tax, Personal Income Tax, Annually Annual Tax, Self Employment Tax, Sales Tax, Property Excise Tax and Debt Obligation Tax. General Excise Taxes are the most common form of taxation imposed by state governments and local governments. These taxes are collected from citizens through local Excise Taxes.
In the United States, sales tax collections come primarily from personal consumption taxes. General Excise Tax on the other hand, is collected from all consumers and sellers across the nation. Sales tax revenues account for approximately three-fourths of the Federal revenue. The General Excise Tax is based upon the amount of sales price and includes consumers’ income, deductions and payroll tax. The major component of General Excise Tax is the Excise fee, which is a percentage of the retail selling price of the item. It also includes certain sales tax elements that are based upon the value of the item sold and are collected by the state.
The process of collection starts when sales tax is paid, and the amount to be deducted is credited to the debit account of the seller’s account. The seller then deducts this amount from the sales tax payable to the government, which becomes the state’s share. General Income Tax is collected by general taxation system from individual income of citizens through income tax returns. In the United States, this tax system applies to people earning under a specified amount (income) from work and certain other circumstances. On the other hand in India, the income tax system applies to everybody regardless of their income and basically, taxes are not collected from individuals.
Currently in India, most of the citizens pay both personal and corporate tax. Although, due to lack of a uniform tax system, companies and individuals pay varying amounts of taxes and it has become a source of great debate between the government and the citizens. Currently, according to the economists and experts, majority of the taxes are indirectly passed on to high-income earners through high-income taxation schemes. These schemes include, income tax, corporate tax, indirect taxes, property tax and sales tax.
Currently, Indian government believes that direct taxes should be replaced with a mix of direct and indirect taxes. This way, tax base remains intact, while income tax rates are kept low for common man. As of now, according to studies, nearly 27% of the Indian population are categorized as high-income earners, which greatly increases the demand for tax consultants. Thus, it becomes essential to hire a consultant who can help you in understanding your tax base and thus prepare a tax strategy that is beneficial to you.