Introduction
Tax is defined as a compulsory contribution to government revenue. it is levied or impose on workers’ income and companies profits by the government while sometimes it is added to goods produce locally or imported.
Tax is gotten from the Latin word taxo; which mean "I estimate" and tax is to impose a financial obligation or levy upon an individual or legal entity by the government such that failure to pay attract penalty. Taxes can also be imposed by many sub national entities. Taxes are made up of direct tax or indirect tax, and may be paid in monetarily or labour equivalent.
A tax can also be defined as a burden place on individuals or owners of property to generate revenue in order to support the government. Tax is not a voluntary payment or donation but a payment enforce by law and imposed by government whether under the name of toll, tribute, duty, custom, excise, etc.
History
Taxes around the world are often levied as a percentage which is called the tax rate. There is a distinction when talking about tax rates which is to distinguish between the marginal rate and the average rate. The average 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.
A progressive tax is a tax that the average tax rate increases when the amount to which the rate is applied increases. The antonym of a progressive tax is a regressive tax in which average tax rate decreases when the amount to which the rate is applied increases. A proportional tax is where the average 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 the taxed entity.
Features
Feature of tax systems is the percentage of the tax burden as it relates to income. The terms progressive, regressive, and proportional are used to illustrate the way the rate moves from low to high, from high to low, or proportionally. It’s explicit a distribution effect, which can be applied to any type of tax system that meets the definition.
Governments tax the individuals’ income and business, including corporations. Everywhere tax is imposed on net profits from business, net gains, and other income. Income computation subject to tax may be determined under accounting principles which can be modified by tax law principles. The incidence of taxation is not stable rather it varies by system, and some systems may be viewed as progressive while others as regressive. Tax rate can vary or be constant depending on income level. Many systems permit individuals certain personal allowances and other non business reductions to taxable income.
Tips and comments
Personal income tax is often collected on a pay-as-you-earn basis known as PAYE, with minute corrections made at the end of the tax year. These corrections take either one of two forms: payments to the government which is for taxpayers who have not paid enough during the tax year; and tax refunds from the government for tax payer who have overpaid. Income tax systems sometimes have deductions available that reduce the total liability of the tax by reducing total taxable income. It might allow losses from one type of income to be counted against another.
Countries have concur with other countries in treaties to mitigate the effects of double taxation.Tax treaties may cover income taxes, inheritance taxes, value added taxes known as VAT etc. Countries of the European Union have also entered into a multilateral agreement with respect to value added taxes under auspices of the European Union. Tax treaties tend to reduce taxes of one treaty country for residents of the other treaty country in order to reduce double taxation of the same income. The demerit is that the provisions and goals vary highly; very few tax treaties are alike while most treaties define which taxes are covered and who is a resident and eligible for benefits, reduce the amounts of tax withheld from interest, dividends, and royalties paid by a resident of one country to residents of the other country, limit tax of one country on business income of a resident of the other country to that income from a permanent establishment in the first country, define circumstances in which income of individuals resident in one country will be taxed in the other country, including salary, self employment, pension, and other income, provide for exemption of certain types of organizations or individuals, and provide procedural frameworks for enforcement and dispute resolution.
The objective for entering into a treaty includes reduction of double taxation, eliminating tax evasion, and encouraging cross-border trade efficiency. Tax treaties improve certainty for taxpayers and tax authorities in their international dealings. American citizens are obligated to report their worldwide income on their federal income tax returns. whether you are living abroad or earning income outside theUnited Statesdoes not relieve Citizen of the responsibility for filing a tax return. ButU.S.citizens living or working abroad can be entitled to various deductions, exclusions and credits.
