Taxation And Finance

Every time you walk into a national park, library, museum, have you ever wondered who is maintaining this huge establishment cost? Every time NASA announces some path-breaking space mission, who is behind the massive funding? The Nation's security needs to be organized with state of art precision weapons-who will pay for that? The answer is simple, we all, the dependable tax payers. A tax is a levy or financial charge which is imposed by the government or a legal entity by a state, on an individual. Administrative wings like local governments or provinces, municipal bodies, counties, etc can also impose tax. Partial payment or non-payment of tax leads to civil and criminal penalties.The rules and regulations guiding the taxation and finance differ from one country to another. An American citizen might happen to pay taxes to four separate government tiers. Purpose of taxation The Purpose of Taxation to the respective authorities can be classified into four ideas: (i)Revenue: We all need good and cleaner roads to ply, better education, and health-care options like hospitals and clinics. Tax collected from us will act as the source of revenue for any government or legal authorities like municipalities. (ii)Redistribution: This is a very debatable yet arguably an important purpose of taxation. It aims at properly distributing the wealth among all sections-the well to do and not so well offs. It is a common practice in any democratic nation, but the way and the proportion it is done varies form nation to nation, government to government. (iii)Repricing: With global warming as a threatening issue we have all heard that some activists and governments are in favor of imposing taxes on industries emitting toxic carbons. This example illustrates the fact that taxes can be levied to address certain externalities too. (iv)Representation: Another debatable purpose is this representation of the common people in politics and government, or asking for the accountability for the peoples' money. The phraseology 'Taxes… are imposed upon people without their consent' might have acted as rhetoric during the American Revolution, to make them shout 'No taxation without representation'. These days some times less importance is given to this fact. Different types of taxation There are different types of taxtion is there. Taxes are usually classified into two different types * Direct Taxation * Indirect Taxation. [A] Direct Taxation: In terms of economics, direct taxes refer to that form of taxes collected from the individual or organization on which they are apparently imposed. For instance, income taxes are collected from the person who earns the income or the case of paying gift tax. In U.S Constitutional provision, however, the direct taxation has a different meaning; it usually refers to the property tax or the poll taxes, which are based on simple logic of ownership or existence. [B] Indirect Taxation: By contrast, in terms of economics, indirect taxes are just opposite to that of direct taxation. Indirect taxes are collected from some one other than the person apparently responsible for paying the taxes, and are usually collected by an intermediary body, like for example retail store, which collects the sales taxes from the proceeds during the purchase. The intermediary body later files a tax return and forwards the tax proceeds to government with return. So the contrast from direct taxation is quite evident, while in the first case it was directly collected by government from the individual or the organization on which it is imposed, and in indirect taxation it requires one intermediary body. Again the concept of indirect taxation is a bit different according to the U.S Constitution. Indirect taxes are usually imposed on rights, privileges, and activities of any individual or organization. Thus, if you are an American citizen and you are selling off your property,would ainvite an indirect taxation on you. Tax rates Taxes are most often levied as a percentage, called as the tax rate, and is usually decided by the authoritative bodies like national government, local municipalities, etc. So every time you need to file you income tax return, you cannot probably do it arbitrarily, it solely depends upon the rate that is currently effective. Conclusion So, whenever you need to file you taxes, just think of the benefits that may affect the greater good. However, it is always healthy to debate on the tax rates depending on the socio-economic balance, national financial health, and economics in general.

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