What Is It Good For?

What is tax? Tax is not voluntary, and everyone says “tell me about it!” But that’s kind of its definition, its an involuntary payment or forced contribution imposed by the government. You face stiff penalties if you do not pay, both civil and criminal, so they hit you with both barrels if you try a little tax evasion. Just look at Al Capone, he was into a little bit of petty organised crime and they nailed him to the wall because he forgot to pay his taxes a couple of years running. Crime just does not pay.

Funds from taxes are used for a wide variety of things. They fund wars, pay for law enforcement and fund economic infrastructure (which basically means they pay for our roads), social engineering and the daily operation of government. They also fund welfare and public services, which includes education, health care, pensions, energy, water and waste management.

Tax money that is collected is always higher than that which can be spent and no, it’s not called over taxation, it’s called compliance cost and it includes the labour cost and other expenses of complying with the tax laws and other rules. It sounds a little iffy and if you want to call it over taxation that’s fine with me. Tax for a specific purpose i.e. tax on alcohol in order to pay for alcohol rehabilitation centres is called hypothecation taxation.

Taxation has four main purposes or as those of us who are terribly au fait with tax vernacular like to call it, the 4 R’s: 1) Revenue: tax in order to raise money to spend on roads, schools, hospitals, the justice system etc. 2) Redistribution: transferring the wealth from rich sections to the poor, a practice that is widely accepted in democracies. 3) Repricing: tax on goods such as tobacco to discourage smoking and suggested tax like carbon tax to tackle global warming. 4) Representation: only citizens are taxed and they, in return, demand accountability from their leaders.

Three different types of tax rates include: progressive tax, where the tax increases as the amount being taxed increases. Regressive tax, where the tax decreases as the amount being taxed increases. Proportional, where the tax rate is fixed to the amount being taxed.

Income tax is paid on the financial incomes of persons, corporations and other legal entities. When companies pay income tax it is known as corporate tax or corporate income tax. For individual people income tax is paid on a pay as you earn basis and at the end of the year your tax is recalculated to see if it was worked out correctly. If it wasn’t worked out correctly you will either have to pay money into to the government or, what we all hope for, the government will have to pay you back in a tax refund. You can get certain money back in tax deductions such as if you have to pay for certain medical procedures or if your insurance scheme is tax deductible. In many countries you get tax discounts if you’re married and have children.

Taxes have been around longer than god, almost. There are references to taxes in the bible, in the book of genesis. Taxes are something that we can’t escape. Just ask Al Capone. And while we can’t deny that they are a necessary evil and that they do pay for vital services, essential repairs and the running of the country (basically), it’s very difficult to get psyched about them. As Margaret Mitchell says in Gone with The Wind, “Death, taxes and childbirth! There’s never any convenient time for any of them.”

About the Author

Sandra wrote this article for the online marketers Capital Tax Consulting deductible offshore tax one of the leading international tax consulting firms in the UK

Article Source:
http://www.articletrader.com/finance/taxes/what-is-it-good-for.html