| The Organisation for Economic | | | | revenue, as those states do not levy a |
| Co-operation and Development (OECD) | | | | state income tax. Such states tend to |
| publishes perhaps the most comprehensive | | | | have a moderate to large amount of |
| analysis of worldwide tax systems. In | | | | tourism or inter-state travel that |
| order to do this it has created a | | | | occurs within their borders, allowing |
| comprehensive categorisation of all | | | | the state to benefit from taxes from |
| taxes in all regimes which it covers: | | | | people the state would otherwise not |
| Income Tax | | | | tax. In this way, the state is able to |
| Income tax is a tax on earnings – | | | | reduce the tax burden on its citizens. |
| money that individuals, corporations, | | | | The US states that do not levy a state |
| trusts or other legal entities receive | | | | income tax are Alaska, Florida, Nevada, |
| in different ways and from different | | | | South Dakota, Texas, Washington state, |
| sources. | | | | and Wyoming. Additionally, New Hampshire |
| The 'tax net' refers to what types of | | | | and Tennessee only levy state income |
| money payments are charged the tax. | | | | taxes on dividends and interest income. |
| Generally, tax will be charged on | | | | Of the above states, only Alaska and New |
| personal earnings (wages), capital | | | | Hampshire do not levy a state sales tax. |
| gains, and business income. The rates | | | | Additional information can be obtained |
| for different types of income may vary | | | | at the Federation of Tax Administrators |
| and some may not be taxed at all. | | | | website. |
| Capital gains may be taxed when realised | | | | In the United States, there is a growing |
| (e.g. when shares are sold) or when | | | | movement for the replacement of all |
| incurred (e.g. when shares appreciate in | | | | federal payroll and income taxes (both |
| value). Business income may only be | | | | corporate and personal) with a national |
| taxed if it is ‘significant’ or | | | | retail sales tax and monthly tax rebate |
| based on the manner in which it is paid. | | | | to households of citizens and legal |
| Some types of income, such as interest | | | | resident aliens. The tax proposal is |
| on bank savings, may be considered as | | | | named FairTax. In Canada the federal |
| personal earnings (similar to wages) or | | | | sales tax is called the Goods and |
| as a realised property gain (similar to | | | | Services tax (GST) and now stands at 6%. |
| selling shares). In some tax systems | | | | All provinces except Alberta also have a |
| ‘personal earnings’ may be strictly | | | | provincial sales tax.Most businesses can |
| defined to require that labour, skill, | | | | claim back the taxes they pay and so |
| or investment was required (e.g. wages); | | | | effectively it is the final consumer who |
| in others they may be defined broadly to | | | | pays the tax. |
| include windfalls (e.g. gambling wins). | | | | Tariffs |
| Tax rates may be progressive or flat. A | | | | An import or export tariff (also called |
| progressive tax taxes differentially | | | | customs duty or impost) is a charge for |
| based on how much has been earned. For | | | | the movement of goods through a |
| example, the first $10,000 in earnings | | | | political border. Tariffs discourage |
| may be taxed at 5%, the next $10,000 at | | | | trade, and they may be used by |
| 10%, and any more income at 20%. | | | | governments to protect domestic |
| Alternatively, a flat tax taxes all | | | | industries. A proportion of tariff |
| earnings at the same rate. A tax system | | | | revenues is often hypothecated to pay |
| may use both progressive and flat taxes | | | | government to maintain a navy or border |
| for different types of income. | | | | police. The classic ways of cheating a |
| Often income tax systems will have | | | | tariff are smuggling or declaring a |
| deductions available. Deductions lessen | | | | false value of goods. |
| the total tax liability by reducing | | | | Toll Tax |
| total taxable income. Income tax systems | | | | A Toll Tax is a tax has been often used |
| may allow losses from one type of income | | | | historically on roads and bridges to pay |
| to be counted against another. For | | | | for state bridge and road projects. |
| example, a loss on the stock market may | | | | Use taxes |
| be deducted against taxable wages. Other | | | | Gas taxes are a form of Use Tax that is |
| tax systems may isolate the loss, such | | | | collected for a particular need and to |
| that business losses can only be | | | | maintain roads. |
| deducted against business tax, by | | | | Value added tax |
| carrying forward the loss to later tax | | | | A value added tax (VAT), also known as |
| years. | | | | 'Goods and Services Tax' (G.S.T), or |
| Income tax is often collected on a | | | | 'Impuesto Indirecto sobre la Prestacion |
| pay-as-you-earn basis, with small | | | | de Servicios' (I.S.I.), Sales Tax, |
| corrections made soon after the end of | | | | Business Tax, or Turnover Tax in some |
| the tax year. These corrections take one | | | | countries, applies the equivalent of a |
| of two forms: payments to the | | | | sales tax to every operation that |
| government, for taxpayers who have not | | | | creates value. To give an example, sheet |
| paid enough during the tax year; and tax | | | | steel is imported by a machine |
| refunds from the government for those | | | | manufacturer. That manufacturer will pay |
| who have overpaid. | | | | the VAT on the purchase price, remitting |
| Retirement tax | | | | that amount to the government. The |
| Some countries with social security | | | | manufacturer will then transform the |
| systems, which provide income to retired | | | | steel into a machine, selling the |
| workers, fund those systems with | | | | machine for a higher price to a |
| specific dedicated taxes. These often | | | | wholesale distributor. The manufacturer |
| differ from comprehensive income taxes | | | | will collect the VAT on the higher |
| in that they are levied only on specific | | | | price, but will remit to the government |
| sources of income, generally wages and | | | | only the excess related to the "value |
| salary (in which case they are called | | | | added" (the price over the cost of the |
| payroll taxes). A further difference is | | | | sheet steel). The wholesale distributor |
| that the total amount of the taxes paid | | | | will then continue the process, charging |
| by or on behalf of a worker is typically | | | | the retail distributor the VAT on the |
| considered in the calculation of the | | | | entire price to the retailer, but |
| retirement benefits to which that worker | | | | remitting only the amount related to the |
| is entitled. Examples of retirement | | | | distribution markup to the government. |
| taxes include the FICA tax, a payroll | | | | The last VAT amount is paid by the |
| tax that is collected from employers and | | | | eventual retail customer who cannot |
| employees in the United States to fund | | | | recover any of the previously paid VAT. |
| the country's Social Security system; | | | | Economic theorists have argued that this |
| and the National Insurance Contributions | | | | minimises the market distortion |
| (NICs) collected from employers and | | | | resulting from the tax, compared to a |
| employees in the United Kingdom to fund | | | | sales tax. However, VAT is held by some |
| the country's national insurance system. | | | | to discourage production. |
| These taxes are sometimes regressive in | | | | VAT was historically used when a sales |
| their immediate effect. For example, in | | | | tax or excise tax was uncollectible. For |
| the United States, each worker, whatever | | | | example, a 30% sales tax is so often |
| his or her income, pays at the same rate | | | | cheated that most of the retail economy |
| up to a specified cap, but income over | | | | will go off the books. By collecting the |
| the cap is not taxed. A further | | | | tax at each production level, and |
| regressive feature is that such taxes | | | | requiring the previous production level |
| often exclude investment earnings and | | | | to collect the next level tax in order |
| other forms of income that are more | | | | to recover the VAT previously paid by |
| likely to be received by the wealthy. | | | | that production level, the theory is |
| The regressive effect is somewhat | | | | that the entire economy helps in the |
| offset, however, by the eventual benefit | | | | enforcement. In reality, forged invoices |
| payments, which typically replace a | | | | and the like demonstrate that tax |
| higher percentage of a lower-paid | | | | evaders will always attempt to cheat the |
| worker's pre-retirement income. | | | | system. |
| Capital gains tax | | | | Input versus Output Tax |
| A capital gains tax is the tax levied on | | | | When a company that is registered for |
| the profit realised upon the sale of a | | | | VAT, buys goods or services from another |
| capital asset. In many cases, the amount | | | | supplier, VAT is charged based on the |
| of a capital gain is treated as income | | | | purchase cost. This is known as input |
| and subject to the marginal rate of | | | | tax. |
| income tax. In some jurisdictions, such | | | | Similarly, when the company sells its |
| as the United States, a favorable | | | | own goods or services it charges its |
| capital gains rate is given based on the | | | | customers VAT at the same rate. This is |
| length of holding. European | | | | output tax. |
| jurisdictions have a similar rate | | | | At regular intervals, the company may |
| reduction to nil on certain property | | | | have to complete a VAT return, giving |
| transactions that qualify for the | | | | details of its input tax and output tax. |
| participation exemption.In Canada, 50% | | | | The difference between output tax and |
| of the gain is taxable income. | | | | input tax is payable to the Local Tax |
| If such a tax is levied on inherited | | | | Authority. If input tax is greater than |
| property then it can act as a de facto | | | | output tax the company can claim back |
| probate or inheritance tax. | | | | money from Local Tax Authority. |
| Corporation tax | | | | Property taxes |
| Corporation tax is a tax on corporate | | | | A property tax is usually levied on the |
| earnings (and often includes capital | | | | value of property owned, usually real |
| gains) of a company. Earnings are | | | | estate. Property taxes may be charged on |
| generally considered gross revenue less | | | | a recurrent basis, or upon a certain |
| expenses. However, corporate expenses | | | | event. |
| that relate to capital expenditures are | | | | A common type of property tax is an |
| rarely deducted in full (such as the | | | | annual charge on the ownership of real |
| entire cost of a company truck) and are | | | | estate, where the tax base is the |
| often deducted over the useful life of | | | | supposed value of the property. For a |
| the asset purchase. Generally, | | | | period of over 150 years from 1695 a |
| industrialized countries also use a | | | | window tax was levied in England, with |
| regressive rate of tax upon corporate | | | | the result that you can still see listed |
| income. | | | | buildings with windows bricked up in |
| Poll tax | | | | order to save their owner's money. A |
| A poll tax, also called a per capita | | | | similar tax existed in France, with |
| tax, or capitation tax, is a tax that | | | | similar results. |
| levies a set amount per individual. One | | | | The two most common type of event driven |
| of the earliest taxes mentioned in the | | | | property taxes are stamp duty, charged |
| Bible of a half-shekel per annum from | | | | upon change of ownership, and |
| each adult Jew (Ex. 30:11-16) was a form | | | | inheritance tax, which is imposed in |
| of poll tax. Poll taxes are | | | | many countries on the estates of the |
| administratively cheap because they are | | | | deceased. |
| easy to compute and collect and | | | | In contrast with a tax on buildings, a |
| difficult to cheat. However, they are | | | | land value tax is levied only on the |
| very unpopular because they are strongly | | | | unimproved value of the land ("land" in |
| regressive (poorer people pay a higher | | | | this instance meaning the economic term, |
| proportion of their income than richer | | | | i.e., all natural resources). Land tax |
| people). The introduction of a poll tax | | | | has long been recognised as the only tax |
| in medieval England was the primary | | | | which does not distort market relations. |
| cause of the 1381 Peasants' Revolt, and | | | | Some political economists claim that |
| in England and Wales in 1990 the change | | | | because land is not the product of |
| from a progressive local taxation based | | | | labour it should be the only tax. See |
| on property values to a single-rate form | | | | Georgism. |
| of taxation regardless of ability to pay | | | | When real estate is held by a higher |
| (the Community Charge, but more | | | | government unit or some other entity not |
| popularly referred to as the Poll Tax) | | | | subject to taxation by the local |
| was instrumental in the demise of the | | | | government, the taxing authority may |
| then Prime Minister Margaret Thatcher. | | | | receive a payment in lieu of taxes to |
| Excises | | | | compensate it for some or all of the |
| Unlike an ad valorem tax, an excise is | | | | foregone tax revenue. |
| not a function of the value of the | | | | Transfer taxes |
| product being taxed. Excise taxes are | | | | Historically, in many countries, a |
| based on the quantity, not the value, of | | | | contract needed to have a stamp affixed |
| product purchased. For example, in the | | | | to make it valid. The charge for the |
| United States, the Federal government | | | | stamp was either a fixed amount or a |
| imposes an excise tax of 18.4 cents per | | | | percentage of the value of the |
| US gallon (4.86 c/L) of gasoline, while | | | | transaction. In most countries the stamp |
| state governments levy an additional 8 | | | | has been abolished but stamp duty |
| to 28 cents per US gallon. | | | | remains. Stamp duty is levied in the UK |
| Purposes and effects of excises | | | | on the purchase of shares and |
| Excises on particular commodities are | | | | securities, the issue of bearer |
| frequently Hypothecated. For example, a | | | | instruments, and certain partnership |
| fuel excise is often used to pay for | | | | transactions. Its modern derivatives, |
| public transportation, especially roads | | | | stamp duty reserve tax and stamp duty |
| and bridges and for the protection of | | | | land tax, are respectively charged on |
| the environment. A special form of | | | | transactions involving securities and |
| hypothecation arises where an excise is | | | | land. Stamp duty has the effect of |
| used to compensate a party to a | | | | discouraging speculative purchases of |
| transaction for alleged uncontrollable | | | | assets by decreasing liquidity. In the |
| abuse: for example, a blank media tax is | | | | US transfer tax is often charged by the |
| a tax on recordable media such as CD-Rs, | | | | state or local government and (in the |
| whose proceeds are typically allocated | | | | case of real property transfers) can be |
| to copyright holders. Critics charge | | | | tied to the recording of the deed or |
| that such taxes tax blindly those who | | | | other transfer documents. Taxes on |
| make legitimate and illegitimate usages | | | | currency transactions are known as Tobin |
| of the products; for instance, a person | | | | taxes. |
| or corporation using CD-R's for data | | | | Inheritance tax |
| archival should not have to subsidize | | | | Some believe that inheritance taxes do |
| the producers of popular music. | | | | not have any harmful effect on the |
| Excises (or exemptions from them) are | | | | economy and may even be beneficial as |
| also used to modify consumption | | | | they encourage consumer spending by the |
| patterns. For example, a high alcohol | | | | elderly. However, some also believe them |
| excise is used to discourage alcohol | | | | to discourage productivity and to |
| consumption, relative to other goods. | | | | disrupt the continuity of family-owned |
| This may be combined with hypothecation | | | | businesses. |
| if the proceeds are then used to pay for | | | | Wealth (net worth) tax |
| the costs of treating illness caused by | | | | Some countries' governments will require |
| alcohol abuse. Similar taxes may exist | | | | declaration of the tax payers' balance |
| on tobacco, pornography, etc..., and | | | | sheet (assets and liabilities), and from |
| they may be collectively referred to as | | | | that exact a tax on net worth (assets |
| sin taxes. A carbon tax is a tax on the | | | | minus liabilities), as a percentage of |
| consumption of carbon-based | | | | the net worth, or a percentage of the |
| non-renewable fuels, such as petrol, | | | | net worth exceeding a certain level. The |
| diesel-fuel, jet fuels and natural gas. | | | | tax is in place for both "natural" and |
| The object is to reduce the release of | | | | in some cases legal "persons". |
| carbon into the atmosphere. In the UK, | | | | Personal property tax |
| vehicle excise duty is an annual tax on | | | | In many jurisdictions (including many |
| vehicle ownership. | | | | American states), there is a general tax |
| Sales tax | | | | levied periodically on residents who own |
| Sales taxes are a form of excise levied | | | | personal property within the |
| when a commodity is sold to its final | | | | jurisdiction. Vehicle and boat |
| consumer. Retail organizations contend | | | | registration fees are subsets of this |
| that such taxes discourage retail sales. | | | | kind of tax. |
| The question of whether they are | | | | Usually, the tax is designed with |
| generally progressive or regressive is a | | | | blanket coverage but with large |
| subject of much current debate. People | | | | exceptions for obvious things like food |
| with higher incomes spend a lower | | | | and clothing. Household goods are exempt |
| proportion of them, so a flat-rate sales | | | | as long as they are kept or used within |
| tax will tend to be regressive. It is | | | | the household. However, any otherwise |
| therefore common to exempt food, | | | | non-exempt object can lose its exemption |
| utilities and other necessities from | | | | if regularly kept outside the household. |
| sales taxes, since poor people spend a | | | | Thus, tax collectors often monitor |
| higher proportion of their incomes on | | | | newspaper articles for stories about |
| these commodities, so such exemptions | | | | wealthy people who have lent art to |
| would make the tax more progressive. | | | | museums for public display, because the |
| This is the classic "You pay for what | | | | artworks have then become subject to |
| you spend" tax, as only those who spend | | | | personal property tax. And if an artwork |
| money on non-exempt (i.e. luxury) items | | | | had to be sent to another state for some |
| pay the tax. | | | | touch-ups, it may have become subject to |
| A small number of US states rely | | | | personal property tax in that state as |
| entirely on sales taxes for state | | | | well. |