Taxation is a system of collecting funds that are used to support a government, to compensate for public finance, and to create a yearly budget. Throughout the ages, people have argued the burden of taxes, where taxes should be imposed, and its limitations.
There is no doubt that taxation is vital if a government were to operate properly. Although until now, the arguments are still there, specially in countries that impose too much taxes for too little or low quality public services.
Here is a summary of the 7 type of taxes:
1. Individual Income Tax:
Individual income tax, or personal income tax, is paid based on a person's income; it includes wages, salaries, savings interest, earnings from rented properties, royalties from patented or copyrighted items, stock dividends, capital gains, and other earnings from a person's occupations.
2. Corporate Income Tax:
Corporate taxes are paid by establishments based on their profits, or net income. Corporate taxes have been a subject of debate for many years; economists claim that only "people" are the entities that should be liable for taxes, and not corporations. On the other hand, the government insists that corporations have the ability to pay taxes (independently), so they should.
3. Payroll Tax:
Aside from the income taxes, employers routinely withhold payroll taxes from wages and salaries. The collections are used mainly for insurance programs for the elderly, poor, disabled, and unemployed people.
4. Consumption Tax:
Consumption tax is imposed on sales of goods or services. It falls into four general categories; general sales taxes, excise taxes, value-added taxes, and tariffs.
- General tax is levied on a wide array of goods and, sometimes, services.
- Governments impose excise taxes only for specific types of goods or services.
- VAT adds a percentage to the price of goods and services. Then, the sellers pay the government the VAT they have collected.
- Tariffs, or customs duties, are taxes charged to imported or exported goods.
5. Property Tax:
Property tax is a tax paid based on an individual's wealth, whether it be financial or real. Financial assets cover for stocks and bonds, while real assets scope real estates, cars, and artworks.
6. Estate, Inheritance, and Gift Taxes:
Estate tax includes everything a deceased person owned at the time of death—from money, proceeds, real estate, stocks, bonds, material possessions, to insurance policies—if there is no one to inherit from them. Opositely, after an estate has been passed down, the inheritors will have to pay inheritance tax. Gift taxes occur after a transfer of property between living people.
7. Miscellaneous Taxes:
Regardless of income, or circumstances, a person may pay a head tax, which is also known as poll tax or lump-sum tax. However, most governments put an exception to poor people, as head taxes hit them the hardest.
Lastly, pollution tax is charged to an establishment that gives off air, water, or soil pollution.