The rules and regulations of taxation are a 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 that 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, or criminal penalties such as imprisonment
Taxes are a major source of income for any country, and they can be broadly categorized into two types: direct tax and indirect tax.
The taxation framework of a particular country contributes to the economy and finance of that country to a significant extent. Taxes are imposed for these four important needs:
- Revenue: Revenue is the principal need for taxation. The money collected in the process of taxation is 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.
Taxes 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
- Wealth tax or net worth tax
- Transfer tax
- Value added tax (VAT)