Understanding Taxation

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To tax (from the Latin taxo; "I estimate") is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many administrative divisions. Taxes consist of direct tax or indirect tax, and may be paid in money or as its labour equivalent (often but not always unpaid labour). A tax may be defined as a "pecuniary burden laid upon individuals or property owners to support the government [...] a payment exacted by legislative authority." [1] A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government [...] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name."[1] Contents [hide] 

1 Overview

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1.1 Tax rates

2 Purposes and effects
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2.1 Proportional, progressive, regressive, and lump-sum 2.2 Direct and indirect



3 Kinds of taxes
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3.1 Taxes on income
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3.1.1 Income tax 3.1.2 Capital gains tax 3.1.3 Corporate tax

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3.2 Social security contributions 3.3 Taxes on payroll or workforce 3.4 Taxes on property     

3.4.1 Property tax 3.4.2 Inheritance tax 3.4.3 Expatriation tax 3.4.4 Transfer tax 3.4.5 Wealth (net worth) tax

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3.5 Taxes on goods and services
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3.5.1 Value added tax (Goods and Services Tax) 3.5.2 Sales taxes 3.5.3 Excises

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3.6 Tariff 3.7 Other taxes
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3.7.1 License fees 3.7.2 Poll tax 3.7.3 Other

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3.8 Descriptive labels given some taxes


3.8.1 Ad valorem

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3.8.2 Consumption tax 3.8.3 Environmental tax

3.9 Fees and effective taxes

4 History
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4.1 Taxation levels 4.2 Forms of taxation



5 Economic effects
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5.1 Tax incidence 5.2 Reduced economic welfare
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5.2.1 Cost of compliance 5.2.2 Deadweight costs of taxation 5.2.3 Perverse incentives 5.2.4 Reduced production

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5.3 Increased economic welfare
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5.3.1 Pigovian taxes 5.3.2 Reduced inequality



6 Views on taxation
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6.1 Support for taxation 6.2 Opposition to taxation



7 Theories on taxation
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7.1 Laffer curve 7.2 Optimal tax



8 See also
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8.1 By country or region

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9 Notes 10 External links [edit]Overview

Pieter Brueghel the Younger, The tax collector, 1640

The legal definition and the economic definition of taxes differ in that economists do not consider many transfers to governments to be taxes. For example, some transfers to the public sector are comparable to prices. Examples include tuition at public universities and fees for utilities provided by local governments. Governments also obtain resources by creating money (e.g., printing bills and minting coins), through voluntary gifts (e.g., contributions to public universities and museums), by imposing penalties (e.g., traffic fines), by borrowing, and by confiscating wealth. From the view of economists, a tax is a non-penal, yet compulsory transfer of resources from the private to thePublic sector levied on a basis of predetermined criteria and without reference to specific benefit received. In modern taxation systems, taxes are levied in money; but, in-kind and corvée taxation are characteristic of traditional or pre-capitaliststates and their functional equivalents. The method of taxation and the government expenditure of taxes raised is often highly debated inpolitics and economics. Tax collection is performed by a government agency such as Canada Revenue Agency, the Internal Revenue Service (IRS) in the United States, or Her Majesty's Revenue and Customs (HMRC) in the United Kingdom. When taxes are not fully paid, civil penalties (such as fines or forfeiture) or criminal penalties (such as incarceration)[2] may be imposed on the non-paying entity or individual.

[edit]Tax rates Main...
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