Taxation – An Introduction
A tax is any financial burden or other sort of levy imposed upon a taxpayer by some governmental body in order to support government spending and various social public needs. A person who has failed to pay, or evasion of or disobedience to tax, is liable to punishment by law. Taxes have many different types, which fall under the heading of personal income tax, sales tax, value-added tax and estate tax. The latter is levied on the assets of individuals and businesses, including real estate. These taxes are collected by local, state and federal agencies, including the Internal Revenue Service and the Department of the Treasury.
Many types of taxation exist, based on the way they are collected and the class of citizens that they affect. In some countries, progressive taxation is in effect, which means that a higher percentage of the total income is placed in capital gains and dividends. Proportional taxes include property taxes and inheritance taxes, and are usually progressive.
The indirect taxes, as their names suggest, are indirect in nature, being derived by an indirect transaction. The major indirect taxes include the following: Impose customs duty, commonly called import duty, to control the movement of manufactured goods in international commerce. Excise tax on items that are imported, and include freight tax, that is applied to the importation of freight. Tax on land can be either direct or indirect tax. Direct tax includes income tax, corporate tax, and inheritance tax.
A percentage, usually about forty percent, of a company’s income is kept as income tax, and another forty percent is given as payroll tax. Both direct and indirect taxes are included in the price of goods and services that enter the national economy through various channels. Examples are taxes on motor vehicles, fuel, air transport, and alcoholic beverages, as well as a number of levies, such as tariffs and quantitative tariffs. In addition, there are numerous internal revenue taxes, such as the income and sales tax, and the corporate tax.
Because taxation has multiple sources and impacts upon different individuals and groups, tax reform is viewed with great concern by experts, politicians, academics, and others. The United States has been engaged in tax reform since the early nineteenth century, when it was decided that the tariff system represented a restraint on trade and would need to be replaced. Consequently, tariffs and other indirect taxes were replaced by a more uniform system of direct tax, which imposed similar duties on similar goods in similar situations.
The nineteenth century saw the rise of a new administrative body, the Federal Trade Commission, which was charged with interpreting and implementing the internal revenue laws. Today, the FTC is responsible for implementing and administering federal tax laws including the Internal Revenue Code, the Fair Debt Collection Practices Act, the Truth in Lending Act, the Truth in Insurance Act, the Estate Tax Act, and the Internal Revenue Code as a whole. The commission’s role is to interpret and implement the tax laws so that they have a stable base of taxation and a reasonable amount of revenue for both state and federal purposes. By imposing taxes on individuals and groups, the government hopes to raise revenues and encourage responsible behavior. While some indirect taxes, such as property taxes, are levied for governmental purposes, such as the payment of vital public services, indirect taxes are collected for the economic welfare of the nation as a whole, for the protection of the national housing market, the maintenance of roads and ports, and the support of essential public amenities.