Tax Information: A tax is a levy or any form of financial charge or fee, which is imposed by different central or state governments on legal entities or individuals. Tax can also be imposed by local authorities like counties, municipal bodies, local governments or provinces.
The rules and regulations of taxation are bit complicated in nature and they are different from one country to another. In the United States, the Internal Revenue Services or IRS is the government agency, which performs the tax collection services for the country. Partial payment or non-payment of taxes results in civil penalties, for example fines or confiscation of assets and criminal penalties, for example imprisonment.
Tax can be broadly categorized into two types, namely direct tax and indirect tax. Tax is a major source of revenue for any country.
The taxation framework of a particular country contributes to the economy and finance of that country to a significant extent. Tax is imposed for four important needs and they are the following:
- Revenue: Revenue is the principal need for taxation. The money collected in the process of taxation are spent for public utility investments and building social infrastructure.
- Redistribution: This refers to a balanced distribution of wealth among all sections of the society.
- Repricing: Tax is imposed to control the consumption of harmful substances like tobacco and alcohol.
- Representation: Taxation represents accountability and improved governance.
The four needs or purposes of taxation are collectively known as the four "R"s.
The taxation law decides on whom a tax should be imposed or who should bear the tax burden. The tax rate is the percentage on which a tax is imposed.
Tax can be categorized into various types and they include the following:
- Corporation tax
- Capital gains tax
- Consumption tax
- Income tax
- Inheritance tax
- Property tax
- Excise duty
- Poll tax
- Sales Tax
- Retirement tax
- Tariffs
- Wealth tax or net worth tax
- Toll
- Transfer tax
- Value added tax (VAT)