Types of taxes

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

Sandiego Apa

Types of taxes