DescriptionA tax is any compulsory financial burden or any sort of levy imposed upon a person by a government agency in order to finance various public needs and government spending. The term “tax” can also refer to the tax system itself, which involves collecting the funds from some public sources and distributing them amongst citizens. A person who has not paid the tax is punished by law, and can be fined, humiliated, or even imprisoned. A tax evasion or refusal to pay is punishable by severe punishment. A tax payment may be voluntary or compulsory, depending upon the circumstances. For example, some taxes such as property taxes, sales taxes, vehicle registration fees, personal injury taxes, are all required to be paid by the person or his heirs.
Types Of Taxes: There are many different types of taxes, each designed to finance public spending. Indirect taxes are generally charged against property, income, or corporate profits, and can either be direct or indirect. A direct tax is one that is imposed directly on an item. Indirect taxes are those that are imposed indirectly, by charging a fee for the activity or item that has been taxed.
Examples Of Indirect Taxes: Alcohol taxes, Value-added tax (VAT), and Sales tax are all examples of indirect taxes. A direct tax can be collected from the producer or retailer and passed on to the consumer; whereas, an indirect tax may only be passed on to the producer or retailer but not to the end user. A tax can also be levied against a person directly, in which case he is said to have paid direct taxes. Examples of indirect taxes are gifts, estate, and inheritance taxes. Examples of direct taxes include income tax, property tax, sales tax, motor vehicle tax, and inheritance tax.
Types Of Income Taxes: There are seven basic types of income taxes: Gift, Gain, Gross income, Lesser gain, Franchised sales, Self-Employment income, and Unearned Income. Gains are the payments received by individuals as gifts, for the actual services provided. Gain must be immediately available to the payer. Lesser gain is income that is gained without the release of any cash. Franchised sales taxes are imposed on sales made by licensed retailers to consumers in their own establishments.
Capital Gains Tax: This is a tax on the value of capital gains. Capital gains are profits realized by the sale of certain property at a capital gain tax rate. The tax on capital gains is 10 percent. An additional stamp duty is levied on dividends and certain capital gains payments.
Self-employment tax: Self-employment tax includes income tax and social security tax on the income earned from the employment of an individual. These taxes are levied according to the schedule fixed by the employer. There is no limit on the amount of taxes to be charged.