Taxes

Taxes are the compulsory financial charges or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law.

Types of Taxes

There are several types of taxes, including income tax, property tax, goods and services tax (GST), value added tax (VAT), and excise tax.

Income Tax

Income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income.

Property Tax

A property tax or millage rate is an ad valorem tax on the value of a property, usually levied on real estate. The tax is levied by the governing authority of the jurisdiction in which the property is located.

Goods and Services Tax (GST)

Goods and Services Tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption. It is paid by the consumers, but it is remitted to the government by the businesses selling the goods and services.

Value Added Tax (VAT)

A value added tax (VAT) is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer.

Excise Tax

An excise tax is a tax on the use or consumption of certain non-essential goods. The tax is usually imposed on the producer or supplier of goods who then often passes the cost onto the consumer.

Tax Evasion and Avoidance

Tax evasion is an illegal practice where a person, organization or corporation intentionally avoids paying their true tax liability. Those caught evading taxes are generally subject to criminal charges and substantial penalties.

Tax avoidance, on the other hand, is not illegal. It involves taking advantage of the tax system to reduce the amount of tax that is payable by means that are within the law.

See Also

• Tax law
• Tax policy
• Taxation in the United States
• Taxation in the United Kingdom

Taxes Resources
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