A carbon tax is a tax on the consumption of carbon-based non-renewable fuels, such as petrol, diesel-fuel, jet fuels, and natural gas. The object is to reduce the release of carbon into the atmosphere. In the United Kingdom, vehicle excise duty is an annual tax on vehicle ownership. An import or export tariff also called customs duty or impost is a charge for the movement of goods through a political border. Tariffs discourage trade , and they may be used by governments to protect domestic industries. A proportion of tariff revenues is often hypothecated to pay government to maintain a navy or border police.
The classic ways of cheating a tariff are smuggling or declaring a false value of goods. Tax, tariff and trade rules in modern times are usually set together because of their common impact on industrial policy , investment policy , and agricultural policy. A trade bloc is a group of allied countries agreeing to minimize or eliminate tariffs against trade with each other, and possibly to impose protective tariffs on imports from outside the bloc.
A customs union has a common external tariff , and the participating countries share the revenues from tariffs on goods entering the customs union. In some societies, tariffs also could be imposed by local authorities on the movement of goods between regions or via specific internal gateways. A notable example is the likin , which became an important revenue source for local governments in the late Qing China.
Occupational taxes or license fees may be imposed on businesses or individuals engaged in certain businesses. Many jurisdictions impose a tax on vehicles. A poll tax, also called a per capita tax , or capitation tax , is a tax that levies a set amount per individual. It is an example of the concept of fixed tax. One of the earliest taxes mentioned in the Bible of a half-shekel per annum from each adult Jew Ex. Poll taxes are administratively cheap because they are easy to compute and collect and difficult to cheat.
Economists have considered poll taxes economically efficient because people are presumed to be in fixed supply and poll taxes therefore do not lead to economic distortions. However, poll taxes are very unpopular because poorer people pay a higher proportion of their income than richer people. In addition, the supply of people is in fact not fixed over time: on average, couples will choose to have fewer children if a poll tax is imposed.
Scotland was the first to be used to test the new poll tax in with England and Wales in The change from a progressive local taxation based on property values to a single-rate form of taxation regardless of ability to pay the Community Charge , but more popularly referred to as the Poll Tax , led to widespread refusal to pay and to incidents of civil unrest, known colloquially as the ' Poll Tax Riots '. Some types of taxes have been proposed but not actually adopted in any major jurisdiction.
An ad valorem tax is one where the tax base is the value of a good, service, or property. Sales taxes, tariffs, property taxes, inheritance taxes, and value added taxes are different types of ad valorem tax. An ad valorem tax is typically imposed at the time of a transaction sales tax or value added tax VAT but it may be imposed on an annual basis property tax or in connection with another significant event inheritance tax or tariffs.
In contrast to ad valorem taxation is a per unit tax, where the tax base is the quantity of something, regardless of its price. An excise tax is an example. Consumption tax refers to any tax on non-investment spending, and can be implemented by means of a sales tax, consumer value added tax, or by modifying an income tax to allow for unlimited deductions for investment or savings. This includes natural resources consumption tax , greenhouse gas tax Carbon tax , "sulfuric tax", and others.
The stated purpose is to reduce the environmental impact by repricing. Economists describe environmental impacts as negative externalities. As early as , Arthur Pigou suggested a tax to deal with externalities see also the section on Increased economic welfare below. The proper implementation of environmental taxes has been the subject of a long lasting debate. An important feature of tax systems is the percentage of the tax burden as it relates to income or consumption. The terms progressive, regressive, and proportional are used to describe the way the rate progresses from low to high, from high to low, or proportionally.
The terms describe a distribution effect, which can be applied to any type of tax system income or consumption that meets the definition. The terms can also be used to apply meaning to the taxation of select consumption, such as a tax on luxury goods and the exemption of basic necessities may be described as having progressive effects as it increases a tax burden on high end consumption and decreases a tax burden on low end consumption.
Taxes are sometimes referred to as "direct taxes" or "indirect taxes". The meaning of these terms can vary in different contexts, which can sometimes lead to confusion. An economic definition, by Atkinson, states that " In law, the terms may have different meanings. Indirect taxes are imposed on events, rights, privileges, and activities. Governments may charge user fees , tolls, or other types of assessments in exchange of particular goods, services, or use of property.
These are generally not considered taxes, as long as they are levied as payment for a direct benefit to the individual paying. Some scholars refer to certain economic effects as taxes, though they are not levies imposed by governments. Other records are granary receipts on limestone flakes and papyrus. In Genesis chapter 47, verse 24 — the New International Version , it states "But when the crop comes in, give a fifth of it to Pharaoh.
The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children". Joseph was telling the people of Egypt how to divide their crop, providing a portion to the Pharaoh. In the Persian Empire , a regulated and sustainable tax system was introduced by Darius I the Great in BC;  the Persian system of taxation was tailored to each Satrapy the area ruled by a Satrap or provincial governor.
At differing times, there were between 20 and 30 Satrapies in the Empire and each was assessed according to its supposed productivity. It was the responsibility of the Satrap to collect the due amount and to send it to the treasury, after deducting his expenses the expenses and the power of deciding precisely how and from whom to raise the money in the province, offer maximum opportunity for rich pickings.
The quantities demanded from the various provinces gave a vivid picture of their economic potential. For instance, Babylon was assessed for the highest amount and for a startling mixture of commodities; 1, silver talents and four months supply of food for the army. India , a province fabled for its gold, was to supply gold dust equal in value to the very large amount of 4, silver talents. Egypt was known for the wealth of its crops; it was to be the granary of the Persian Empire and, later, of the Roman Empire and was required to provide , measures of grain in addition to talents of silver.
The Rosetta Stone , a tax concession issued by Ptolemy V in BC and written in three languages "led to the most famous decipherment in history—the cracking of hieroglyphics". Islamic rulers imposed Zakat a tax on Muslims and Jizya a poll tax on conquered non-Muslims. In India this practice began in the 11th century. Numerous records of government tax collection in Europe since at least the 17th century are still available today. But taxation levels are hard to compare to the size and flow of the economy since production numbers are not as readily available. Government expenditures and revenue in France during the 17th century went from about In —89, it reached During the war-filled years of the eighteenth and early nineteenth century, tax rates in Europe increased dramatically as war became more expensive and governments became more centralized and adept at gathering taxes.
Another study confirmed this number, finding that per capita tax revenues had grown almost sixfold over the eighteenth century, but that steady economic growth had made the real burden on each individual only double over this period before the industrial revolution. Effective tax rates were higher in Britain than France the years before the French Revolution , twice in per capita income comparison, but they were mostly placed on international trade. In France, taxes were lower but the burden was mainly on landowners, individuals, and internal trade and thus created far more resentment.
Taxation as a percentage of GDP was In monetary economies prior to fiat banking, a critical form of taxation was seigniorage , the tax on the creation of money. Some principalities taxed windows, doors, or cabinets to reduce consumption of imported glass and hardware. Armoires, hutches , and wardrobes were employed to evade taxes on doors and cabinets.
In some circumstances, taxes are also used to enforce public policy like congestion charge to cut road traffic and encourage public transport in London. In Tsarist Russia, taxes were clamped on beards. Today, one of the most-complicated taxation systems worldwide is in Germany. Three quarters of the world's taxation literature refers to the German system.
Europe and North America tend to rely more on direct taxes, while developing economies i. India and several African countries rely more on indirect taxes. In economic terms, taxation transfers wealth from households or businesses to the government of a nation. Adam Smith writes in The Wealth of Nations that. The side-effects of taxation such as economic distortions and theories about how best to tax are an important subject in microeconomics. Taxation is almost never a simple transfer of wealth. Economic theories of taxation approach the question of how to maximize economic welfare through taxation.
A study looking at the impact of tax cuts for different income groups, it was tax cuts for low-income groups that had the greatest positive impact on employment growth. Law establishes from whom a tax is collected. In many countries, taxes are imposed on business such as corporate taxes or portions of payroll taxes. However, who ultimately pays the tax the tax "burden" is determined by the marketplace as taxes become embedded into production costs. Economic theory suggests that the economic effect of tax does not necessarily fall at the point where it is legally levied.
For instance, a tax on employment paid by employers will impact on the employee, at least in the long run. The greatest share of the tax burden tends to fall on the most inelastic factor involved—the part of the transaction which is affected least by a change in price.
So, for instance, a tax on wages in a town will at least in the long run affect property-owners in that area. Depending on how quantities supplied and demanded vary with price the "elasticities" of supply and demand , a tax can be absorbed by the seller in the form of lower pre-tax prices , or by the buyer in the form of higher post-tax prices. If the elasticity of supply is low, more of the tax will be paid by the supplier. If the elasticity of demand is low, more will be paid by the customer; and, contrariwise for the cases where those elasticities are high.
If the seller is a competitive firm, the tax burden is distributed over the factors of production depending on the elasticities thereof; this includes workers in the form of lower wages , capital investors in the form of loss to shareholders , landowners in the form of lower rents , entrepreneurs in the form of lower wages of superintendence and customers in the form of higher prices.
If the product has an elastic demand, a greater portion of the tax will be absorbed by the seller. This is because goods with elastic demand cause a large decline in quantity demanded for a small increase in price. Therefore, in order to stabilize sales, the seller absorbs more of the additional tax burden.
The purpose of taxation is to provide for government spending without inflation. The provision of public goods such as roads and other infrastructure, schools, a social safety net , health care, national defense, law enforcement, and a courts system increases the economic welfare of society if the benefit outweighs the costs involved. The existence of a tax can increase economic efficiency in some cases.
If there is a negative externality associated with a good, meaning that it has negative effects not felt by the consumer, then a free market will trade too much of that good. By taxing the good, the government can increase overall welfare as well as raising revenue. This type of tax is called a Pigovian tax , after economist Arthur Pigou.http://salbwspk.org/includes/843-localiser-le-portable.php
Income tax - Wikipedia
Possible Pigovian taxes include those on polluting fuels like petrol , taxes on goods which incur public healthcare costs such as alcohol or tobacco , and charges for existing 'free' public goods like congestion charging are another possibility. Progressive taxation may reduce economic inequality. This effect occurs even when the tax revenue isn't redistributed. Most taxes see below have side effects that reduce economic welfare , either by mandating unproductive labor compliance costs or by creating distortions to economic incentives deadweight loss and perverse incentives.
Although governments must spend money on tax collection activities, some of the costs, particularly for keeping records and filling out forms, are borne by businesses and by private individuals. These are collectively called costs of compliance. More complex tax systems tend to have higher compliance costs.
This fact can be used as the basis for practical or moral arguments in favor of tax simplification such as the FairTax or OneTax , and some flat tax proposals. In the absence of negative externalities , the introduction of taxes into a market reduces economic efficiency by causing deadweight loss. In a competitive market the price of a particular economic good adjusts to ensure that all trades which benefit both the buyer and the seller of a good occur.
The introduction of a tax causes the price received by the seller to be less than the cost to the buyer by the amount of the tax. This causes fewer transactions to occur, which reduces economic welfare ; the individuals or businesses involved are less well off than before the tax. The tax burden and the amount of deadweight cost is dependent on the elasticity of supply and demand for the good taxed. Most taxes—including income tax and sales tax —can have significant deadweight costs. The only way to avoid deadweight costs in an economy that is generally competitive is to refrain from taxes that change economic incentives.
Such taxes include the land value tax ,  where the tax is on a good in completely inelastic supply, a lump sum tax such as a poll tax head tax which is paid by all adults regardless of their choices. Arguably a windfall profits tax which is entirely unanticipated can also fall into this category. Deadweight loss does not account for the effect taxes have in leveling the business playing field. Businesses that have more money are better suited to fend off competition. It is common that an industry with a small amount of very large corporations has a very high barrier of entry for new entrants coming into the marketplace.
This is due to the fact that the larger the corporation, the better its position to negotiate with suppliers. Also, larger companies may be able to operate at low or even negative profits for extended periods of time, thus pushing out competition. More progressive taxation of profits, however, would reduce such barriers for new entrants, thereby increasing competition and ultimately benefiting consumers. Complexity of the tax code in developed economies offer perverse tax incentives. The more details of tax policy there are, the more opportunities for legal tax avoidance and illegal tax evasion.
These not only result in lost revenue, but involve additional costs: for instance, payments made for tax advice are essentially deadweight costs because they add no wealth to the economy. Perverse incentives also occur because of non-taxable 'hidden' transactions; for instance, a sale from one company to another might be liable for sales tax , but if the same goods were shipped from one branch of a corporation to another, no tax would be payable. To address these issues, economists often suggest simple and transparent tax structures which avoid providing loopholes.
Sales tax, for instance, can be replaced with a value added tax which disregards intermediate transactions. Following Nicolas Kaldor's research, public finance in developing countries is strongly tied to state capacity and financial development. As state capacity develops, states not only increase the level of taxation but also the pattern of taxation. With the increase of larger tax bases and the diminish of the importance of trading tax, while income tax gains more importance. War is an incentive for states to raise tax and strengthen states capacity. Historically, many taxation breakthroughs took place during the wartime.
The introduction of income tax in Britain was due to the Napoleonic War in US first introduce income tax during Civil War. A well-designed tax system can minimize efficiency loss and boost economic growth. With better compliance and better support to financial institutions and individual property, the government will be able to collect more tax. Although wealthier countries have higher tax revenue, economic growth does not always translate to higher tax revenue.
For example, in India, increases in exemptions leads to the stagnation of income tax revenue at around 0. Researchers for EPS PEAKS  stated that the core purpose of taxation is revenue mobilisation, providing resources for National Budgets, and forming an important part of macroeconomic management. They said economic theory has focused on the need to 'optimise' the system through balancing efficiency and equity, understanding the impacts on production, and consumption as well as distribution, redistribution , and welfare.
They state that taxes and tax reliefs have also been used as a tool for behavioural change, to influence investment decisions , labour supply , consumption patterns , and positive and negative economic spill-overs externalities , and ultimately, the promotion of economic growth and development. The tax system and its administration also play an important role in state-building and governance, as a principal form of 'social contract' between the state and citizens who can, as taxpayers, exert accountability on the state as a consequence.
The researchers wrote that domestic revenue forms an important part of a developing country's public financing as it is more stable and predictable than Overseas Development Assistance and necessary for a country to be self-sufficient. However, in a quarter of African countries Overseas Development Assistance does exceed tax collection,  with these more likely to be non-resource-rich countries. This suggests countries making most progress replacing aid with tax revenue tend to be those benefiting disproportionately from rising prices of energy and commodities.
Long-term average performance of tax revenue as a share of GDP in low-income countries has been largely stagnant, although most have shown some improvement in more recent years. Some low-income countries have relatively high tax-to- GDP ratios due to resource tax revenues e. Angola or relatively efficient tax administration e. Kenya , Brazil whereas some middle-income countries have lower tax-to-GDP ratios e. Malaysia which reflect a more tax-friendly policy choice. While overall tax revenues have remained broadly constant, the global trend shows trade taxes have been declining as a proportion of total revenues IMF, , with the share of revenue shifting away from border trade taxes towards domestically levied sales taxes on goods and services.
Low-income countries tend to have a higher dependence on trade taxes, and a smaller proportion of income and consumption taxes, when compared to high income countries. One indicator of the taxpaying experience was captured in the 'Doing Business' survey,  which compares the total tax rate, time spent complying with tax procedures and the number of payments required through the year, across countries. The 'easiest' countries in which to pay taxes are located in the Middle East with the UAE ranking first, followed by Qatar and Saudi Arabia , most likely reflecting low tax regimes in those countries.
Countries in Sub-Saharan Africa are among the 'hardest' to pay with the Central African Republic , Republic of Congo , Guinea and Chad in the bottom 5, reflecting higher total tax rates and a greater administrative burden to comply. Aid interventions in revenue can support revenue mobilisation for growth, improve tax system design and administrative effectiveness, and strengthen governance and compliance. Lastly, she found that identifying areas for further reform requires country-specific diagnostic assessment: broad areas for developing countries identified internationally e. IMF include, for example property taxation for local revenues, strengthening expenditure management, and effective taxation of extractive industries and multinationals.
According to most political philosophies , taxes are justified as they fund activities that are necessary and beneficial to society. Additionally, progressive taxation can be used to reduce economic inequality in a society. According to this view, taxation in modern nation-states benefit the majority of the population and social development. It can also be argued that in a democracy , because the government is the party performing the act of imposing taxes, society as a whole decides how the tax system should be organized.
For traditional conservatives , the payment of taxation is justified as part of the general obligations of citizens to obey the law and support established institutions. The conservative position is encapsulated in perhaps the most famous adage of public finance , "An old tax is a good tax". Compulsory taxation of individuals, such as income tax , is often justified on grounds including territorial sovereignty , and the social contract.
Defenders of business taxation argue that it is an efficient method of taxing income that ultimately flows to individuals, or that separate taxation of business is justified on the grounds that commercial activity necessarily involves use of publicly established and maintained economic infrastructure, and that businesses are in effect charged for this use.
They advocate a high tax the "Single Tax" on land and other natural resources to return this unearned income to the state, but no other taxes. Because payment of tax is compulsory and enforced by the legal system, rather than voluntary like crowdfunding , some political philosophies view taxation as theft , extortion, or as slavery , or as a violation of property rights , or tyranny, accusing the government of levying taxes via force and coercive means.
The view that democracy legitimizes taxation is rejected by those who argue that all forms of government, including laws chosen by democratic means, are fundamentally oppressive. According to Ludwig von Mises , "society as a whole" should not make such decisions, due to methodological individualism. Karl Marx assumed that taxation would be unnecessary after the advent of communism and looked forward to the " withering away of the state ".
In socialist economies such as that of China, taxation played a minor role, since most government income was derived from the ownership of enterprises, and it was argued by some that monetary taxation was not necessary. Tax choice is the theory that taxpayers should have more control with how their individual taxes are allocated. If taxpayers could choose which government organizations received their taxes, opportunity cost decisions would integrate their partial knowledge.
Supporters argue that allowing taxpayers to demonstrate their preferences would help ensure that the government succeeds at efficiently producing the public goods that taxpayers truly value. Joseph Stiglitz 's Henry George Theorem predicts its sufficiency because—as George also noted—public spending raises land value. Geoists Georgists and geolibertarians state that taxation should primarily collect economic rent , in particular the value of land , for both reasons of economic efficiency as well as morality. The efficiency of using economic rent for taxation is as economists agree    due to the fact that such taxation cannot be passed on and does not create any dead-weight loss , and that it removes the incentive to speculate on land.
Economist and social reformer Henry George opposed sales taxes and protective tariffs for their negative impact on trade. Therefore, income from labour and proper capital should remain untaxed. For this reason many Geoists—in particular those that call themselves geolibertarian —share the view with libertarians that these types of taxation but not all are immoral and even theft. George stated there should be one single tax : the Land Value Tax , which is considered both efficient and moral. Therefore, the economic rent of land is not the product of one particular individual and it may be claimed for public expenses.
According to George, this would end real estate bubbles , business cycles , unemployment and distribute wealth much more evenly. John Locke stated that whenever labour is mixed with natural resources, such as is the case with improved land, private property is justified under the proviso that there must be enough other natural resources of the same quality available to others. Therefore, under the assumed principle of equal rights of all people to natural resources, the occupier of any such land must compensate the rest of society to the amount of that value.
For this reason, geoists generally believe that such payment cannot be regarded as a true 'tax', but rather a compensation or fee. Modern geoists note that land in the classical economic meaning of the word referred to all natural resources , and thus also includes resources such as mineral deposits , water bodies and the electromagnetic spectrum , to which privileged access also generates economic rent that must be compensated.
Under the same reasoning most of them also consider pigouvian taxes as compensation for environmental damage or privilege as acceptable and even necessary. In economics , the Laffer curve is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. It is used to illustrate the concept of taxable income elasticity that taxable income will change in response to changes in the rate of taxation.
The curve is constructed by thought experiment. One potential result of the Laffer curve is that increasing tax rates beyond a certain point will become counterproductive for raising further tax revenue. A hypothetical Laffer curve for any given economy can only be estimated and such estimates are sometimes controversial.
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Most governments take revenue which exceeds that which can be provided by non-distortionary taxes or through taxes which give a double dividend. Optimal taxation theory is the branch of economics that considers how taxes can be structured to give the least deadweight costs, or to give the best outcomes in terms of social welfare.
The Ramsey problem deals with minimizing deadweight costs. Because deadweight costs are related to the elasticity of supply and demand for a good, it follows that putting the highest tax rates on the goods for which there is most inelastic supply and demand will result in the least overall deadweight costs. Some economists sought to integrate optimal tax theory with the social welfare function , which is the economic expression of the idea that equality is valuable to a greater or lesser extent.
If individuals experience diminishing returns from income, then the optimum distribution of income for society involves a progressive income tax. Mirrlees optimal income tax is a detailed theoretical model of the optimum progressive income tax along these lines. Over the last years the validity of the theory of optimal taxation was discussed by many political economists. Taxes are most often levied as a percentage, called the tax rate.
An important distinction when talking about tax rates is to distinguish between the marginal rate and the effective tax rate. The effective 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. From Wikipedia, the free encyclopedia. Taxation An aspect of fiscal policy Policies.
Academic Mihir A. Desai Dhammika Dharmapala James R. Hines Jr. By country. Main article: Income tax. Main article: Negative income tax. Main article: Capital gains tax. Main article: Corporate tax. Main article: Payroll tax. Main articles: Property tax and Land value tax. Main article: Inheritance tax. Main article: Expatriation tax. Main article: Transfer tax.
Main article: Wealth tax. Main article: Value added tax. Main article: Sales tax. Main article: Excise. Main article: Tariff. Main article: Poll tax.
Can a National Sales Tax Replace Income Taxes in the U.S.?
Main articles: Ad valorem tax and Per unit tax. Main article: Consumption tax. Main articles: Direct tax and Indirect tax. Main article: Tax incidence. See also: Effect of taxes and subsidies on price. Main article: Social contract. Every tax, however, is, to the person who pays it, a badge, not of slavery, but of liberty. Main articles: Tax noncompliance and Taxation as theft. This section may lend undue weight to certain ideas, incidents, or controversies. Please help improve it by rewriting it in a balanced fashion that contextualizes different points of view.
November Learn how and when to remove this template message. Main article: Tax choice. Main articles: Georgism , Geolibertarianism , and Land value tax. Main article: Theory of taxation. Main article: Laffer curve. Main article: Optimal tax. Main article: Tax rate. Whatever your reasons, this easy to read book covers the basics for you. Written by a university lecturer and qualified solicitor, it is short enough to read in several sittings and won't bog you down in unnecessary details.
I hope it will encourage you to read further into the subject, and who knows where that may lead you? Get A Copy. Kindle Edition , 96 pages. More Details Other Editions 1. Friend Reviews. To see what your friends thought of this book, please sign up. Lists with This Book. This book is not yet featured on Listopia.
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Community Reviews. Showing Rating details. Sort order. Apr 18, Repton rated it really liked it. Well an hour later it was finished. Guess I know the answer. Excellent really basic intro There are no discussion topics on this book yet. About Michael Lambarth.
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