Tax
To tax (from the
Latin taxo; "I estimate") is to
impose a financial charge or other levy upon a taxpayer (an individual
or legal
entity) by a
state or the functional equivalent of a
state such that failure to pay is punishable by law.Taxes are also imposed by many subnational entities. Taxes consist of direct tax or indirect tax, and may be paid in money or as its labour equivalent (often but not always unpaid labour). A tax may be defined as a "pecuniary burden laid upon individuals or property owners 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]
The legal definition and the economic definition of taxes differ in that economists do not consider many transfers to governments to be taxes. For example, some transfers to the public sector are comparable to prices. Examples include tuition at public universities and fees for utilities provided by local governments. Governments also obtain resources by creating money (e.g., printing bills and minting coins), through voluntary gifts (e.g., contributions to public universities and museums), by imposing penalties (e.g., traffic fines), by borrowing, and by confiscating wealth. From the view of economists, a tax is a non-penal, yet compulsory transfer of resources from the private to the public sector levied on a basis of predetermined criteria and without reference to specific benefit received.
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. 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. 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.
Purposes
and effects
Money provided by taxation
has 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.), public works, social engineering, and the operation of government
itself. Governments also use taxes to fund welfare and public services. A portion of taxes also go to pay
off the state's debt and the interest this debt accumulates. These services can
include education systems, health
care systems,
pensions for the elderly, unemployment
benefits,
and public
transportation.
Energy, water and waste management systems are also common public
utilities.
Colonial and modernizing 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. 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. In addition, taxes are applied to fund foreign aid and military ventures, 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.
A nation's tax system is often a reflection of its communal values or/and 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 that the public and/or government 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.
All large businesses incur administrative costs in the process of delivering revenue collected from customers to the suppliers of the goods or services being purchased. Taxation is no different, 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. This practice is often disliked by finance ministers, since it reduces their freedom of action. Some economic theorists consider the concept to be intellectually dishonest since, in reality, money is fungible. 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. They have therefore sought to identify the kind of tax system that would minimize this distortion.
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. Others (e.g. libertarians) argue that most or all forms of taxes are immoral due to their involuntary (and therefore eventually coercive/violent) nature. The most extreme anti-tax view is anarcho-capitalism, in which the provision of all social services should be voluntarily bought by the person(s) using them.
The
Four "R"s
Taxation has four main
purposes or effects: Revenue, Redistribution, Repricing, and Representation.[citation needed]- The main purpose is revenue: taxes raise money to spend on
armies, roads, schools and hospitals, and on more indirect government
functions like market regulation or legal systems.
- A second is redistribution. Normally, this means transferring wealth from the richer sections
of society to poorer sections.
- A third purpose of taxation is repricing. Taxes are levied to address
externalities; for example, tobacco is taxed to discourage
smoking, and a carbon tax discourages use of
carbon-based fuels.
- A fourth, consequential effect of taxation
in its historical setting has been representation. 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.
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.[3][4]
Proportional,
progressive, regressive, and lump-sum
An important feature of tax
systems is the percentage of the tax burden as it relates to income or
consumption. 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.
- 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. This effect is commonly produced where means testing is
used to withdraw tax allowances or state benefits.
- In between is a proportional
tax,
where the effective tax rate is fixed, while the amount to which the rate
is applied increases.
- A lump-sum tax is a tax that is a fixed
amount, no matter the change in circumstance of the taxed entity.
Direct
and indirect
Taxes are sometimes
referred to as "direct taxes" or "indirect taxes". The
meaning of these terms can vary in different contexts, which can sometimes lead
to confusion. An economic definition, by Atkinson, states that "...direct
taxes may be adjusted to the individual characteristics of the taxpayer,
whereas indirect taxes are levied on transactions irrespective of the
circumstances of buyer or seller."[8] According to this definition, for example,
income tax is "direct", and sales tax is "indirect". In
law, the terms may have different meanings. In
History
Taxation levels
Later, in the Persian Empire, a regulated and sustainable tax system was introduced by Darius I the Great in 500 BC;[11] the Persian system of taxation was tailored to each Satrapy (the area ruled by a Satrap or provincial governor). At differing times, there were between 20 and 30 Satrapies in the Empire and each was assessed according to its supposed productivity. It was the responsibility of the Satrap to collect the due amount and to send it to the emperor, after deducting his expenses (the expenses and the power of deciding precisely how and from whom to raise the money in the province, offer maximum opportunity for rich pickings). The quantities demanded from the various provinces gave a vivid picture of their economic potential. For instance, Babylon was assessed for the highest amount and for a startling mixture of commodities; 1,000 silver talents and four months supply of food for the army. India, a province fabled for its gold, was to supply gold dust equal in value to the very large amount of 4,680 silver talents.
The Rosetta Stone, a tax concession issued by Ptolemy V in 196 BC and written in three languages "led to the most famous decipherment in history—the cracking of hieroglyphics".[13]
In
Numerous records of government tax collection in
Taxation as a percentage of GDP in 2003 was 56.1% in Denmark, 54.5% in France, 49.0% in the Euro area, 42.6% in the United Kingdom, 35.7% in the United States, 35.2% in Ireland, and among all OECD members an average of 40.7%.[16][17]
Forms
of taxation
In monetary economies prior
to fiat banking, a critical form of taxation was seigniorage, the tax on the creation of money.Other obsolete forms of taxation include:
- Scutage, which is paid in lieu of military
service; strictly speaking, it is 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). This should not be
confused with the modern practice of the same name which is normally
voluntary.
- (Feudal) aids, a type of tax or due that
was paid by a vassal to his lord during feudal times.
- Danegeld, a medieval land tax originally
raised to pay off raiding Danes and later used to fund military
expenditures.
- Carucage, a tax which replaced the
danegeld in
- Tax farming, the principle of assigning
the responsibility for tax revenue collection to private citizens or
groups.
- Socage, a feudal tax system based on land rent.
- Burgage, a feudal tax system based on
land rent.
Tax
rates
Taxes are most often levied
as a percentage, called the tax rate. 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%.
Economics
of taxation
In economic terms, taxation
transfers wealth from households or businesses to
the government of a nation. The side-effects of taxation and theories about how
best to tax are an important subject in microeconomics. Taxation is almost never a simple
transfer of wealth. Economic theories of taxation approach the question of how
to minimize the loss of economic welfare through taxation and also discuss
how a nation can perform redistribution of wealth in the most efficient manner.
Deadweight
costs of taxation
The introduction of taxes
into a market usually reduces economic
efficiency by
causing deadweight loss. In a competitive market the price of a particular economic
good adjusts
to ensure that all trades which benefit both the buyer and the seller of a good
occur. The introduction of a tax causes the price received by the seller to be
less than the cost to the buyer by the amount of the tax. This causes fewer
trades to occur, which reduces economic welfare in markets without externalities: the individuals or businesses
involved are less well off than before the tax. The tax burden and the amount of deadweight cost
is dependent on the elasticity of supply and demand for the good
taxed.Most taxes—including income tax and sales tax—can have significant deadweight costs. The only way to avoid deadweight costs in an economy that is generally competitive is to refrain from taxes that change economic incentives. Such taxes include the land value tax,[18] where the tax is on a good in completely inelastic supply, a lump sum tax such as a poll tax (head tax) which is paid by all adults regardless of their choices. Arguably a windfall profits tax which is entirely unanticipated can also fall into this category.
Pigovian
taxes
The existence of a tax can increase
economic efficiency in some cases. If there is a negative
externality
associated with a good, meaning that it has negative effects not felt by the
consumer, then a free market will trade too much of that good. By taxing the
good, the government can increase overall welfare as well as raising revenue.
This type of tax is called a Pigovian tax, after economist Arthur
Pigou.Possible Pigovian taxes include those on polluting fuels (like petrol), taxes on goods which incur public healthcare costs (such as alcohol or tobacco), and charges for existing 'free' public goods (like congestion charging) are another possibility.
Transparency
and simplicity
Another concern is that the
complicated tax codes of developed economies offer perverse economic
incentives.
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. 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.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.
Tax
incidence
Law establishes from whom a
tax is collected. In many countries, taxes are imposed on business (such as corporate
taxes or
portions of payroll taxes). However, who ultimately pays the
tax (the tax "burden") is determined by the marketplace as taxes
become embedded into production costs. 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.
Diagram
illustrating taxes effect
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 is distributed over 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), entrepreneurs (in the form of lower
wages of superintendence) and customers (in the form of higher prices).To illustrate this relationship, suppose that the market price of a product is $1.00, and that a $0.50 tax is imposed on the product that, by law, is to be collected from the seller. If the product has an elastic demand, a greater portion of the tax will be absorbed by the seller. This is because goods with elastic demand cause a large decline in quantity demanded for a small increase in price. Therefore in order to stabilize sales, the seller absorbs more of the additional tax burden. 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).[19]
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 (for
example, FairTax and flat tax proposals).
Kinds
of taxes
The Organisation for Economic
Co-operation and Development (OECD) publishes an analysis of tax systems of
member countries. As part of such analysis, OECD developed a definition and
system of classification of internal taxes,[20] generally followed below. In addition, many
countries impose taxes (tariffs) on the import of goods.
Taxes
on income
Income
tax
Many jurisdictions tax the
income of individuals and business entities, including corporations. Generally
the tax is imposed on net profits from business, net gains, and other income.
Computation of income subject to tax may be determined under accounting
principles used in the jurisdiction, which may be modified or replaced by tax
law principles in the jurisdiction. The incidence of taxation varies by system,
and some systems may be viewed as progressive or regressive. Rates of tax may vary or be
constant (flat) by income level. Many systems allow individuals certain
personal allowances and other nonbusiness reductions to taxable income.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. 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. 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.
Capital
gains tax
Most jurisdictions imposing
an income tax treat capital gains as part of income subject to tax.
Capital gain is generally gain on sale of capital assets, i.e., those
assets not held for sale in the ordinary course of business. Capital assets
include personal assets in many jurisdictions. Some jurisdictions provide
preferential rates of tax or only partial taxation for capital gains. Some
jurisdictions impose different rates or levels of capital gains taxation based
on the length of time the asset was held.
Corporate tax
Corporate tax refers to
income, capital, net worth, or other taxes imposed on corporations. Rates of
tax and the taxable base for corporations may differ from those for individuals
or other taxable persons.
Social
security contributions
Many countries provide
publicly funded retirement or health care systems.[21] In connection with these systems, the country
typically requires employers and/or employees to make compulsory payments.[22] These payments are often computed
by reference to wages or earnings from self employment. Tax rates are generally
fixed, but a different rate may be imposed on employers than on employees.[23] Some systems provide an upper limit
on earnings subject to the tax. A few systems provide that the tax is payable
only on wages above a particular amount. Such upper or lower limits may apply
for retirement but not health care components of the tax.
Taxes
on payroll or workforce
Unemployment and similar
taxes are often imposed on employers based on total payroll. These taxes may be
imposed at both the country and sub-country levels.[24]
Taxes
on property
Recurrent [property taxes]
may be imposed on immovable property (real property) and some classes of
movable property. In addition, recurrent taxes may be imposed on net wealth of
individuals or corporations.[25] Many jurisdictions impose estate tax, gift tax or other inheritance taxes on property at death or gift
transfer. Some jurisdictions impose taxes on financial or capital transactions.
Property
tax
A property tax (or millage
tax) is an ad valorem tax levy on the value of property that
the owner of the property is required to pay to a government in which the
property is situated. Multiple jurisdictions may tax the same property. There
are three general varieties 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 are usually 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. For a period of over 150 years from
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.e., all natural resources, or the natural resources associated with specific areas of the Earth's surface: "lots" or "land parcels"). Proponents of land value tax argue that it is economically justified, as it will not deter production, distort market mechanisms or otherwise create deadweight losses the way other taxes do.[26]
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.
In many jurisdictions (including many American states), there is a general tax levied periodically on residents who own personal property (personalty) within the jurisdiction. 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.[27] Any otherwise non-exempt object can lose its exemption if regularly kept outside the household.[27] 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.[27] 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.[27]
No hay comentarios:
Publicar un comentario