TaxCloud Direct Tax Software. Need Help? About us. Download link sent. Category Taxation. Taxation Reviewed by Vishnu Updated on Nov 05, Introduction Taxation is the means by which a government or the taxing authority imposes or levies a tax on its citizens and business entities. What is Taxation? A detailed breakdown of the procedure for filing the tax The tax structure in India can be classified into two main categories: Direct Tax Indirect Tax Direct Tax: It is defined as the tax imposed directly on a taxpayer and is required to be paid to the government.
There are many forms of taxes; most are applied as a percentage of a monetary exchange for example, when income is earned or a sales transaction is completed. Other forms of taxes, such as property taxes, are applied based on the assessed value of a held asset.
Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.
This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. A payroll tax is a percentage withheld from an employee's salary and paid to a government to fund public programs. Learn more about payroll taxes here. What Are Medicare Wages? Medicare wages are employee earnings that are subject to a U. What Is Self-Employment Tax? Self-employment tax is the tax that a sole proprietor or freelancer must pay to the federal government to fund Medicare and Social Security.
Your Complete Guide to Social Security Tax This tax, levied on both employers and employees, funds Social Security and is collected in the form of a payroll tax or a self-employment tax. What Is a Flat Tax? A flat tax system applies the same tax rate to every taxpayer regardless of their income bracket.
Discover more about the flat tax system here. S payroll tax deducted to fund the Social Security and Medicare programs. Partner Links. Related Articles. Income Tax Federal Withholding Tax vs. State Withholding Tax: What's the Difference?
Investopedia is part of the Dotdash publishing family. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. This is in contrast to an excise tax, where the charged value is based on the number of items being sold.
Sales tax is a form of regressive taxation; the liability is based on the percentage of income consumed, which is higher for low income earners. As a result, individuals earning a relatively lower income will pay a higher proportion of income in the form of sales tax, defining the regressive nature of the tax. Though a general revenue source, sales taxes are also used to modify behavior. For example taxes on cigarettes are meant to dissuade purchase due to the inherent health implications of smoking.
In economics, deadweight loss is a loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal.
In economics, a deadweight loss also known as excess burden or allocative inefficiency is a loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal resource allocation where it is impossible to make any one individual better off without making at least one individual worse off.
Causes of deadweight loss can include actions that prevent the market from achieving an equilibrium clearing condition where supply and demand are equal and include taxes or subsidies and binding price ceilings or floors including minimum wages. Deadweight loss can generally be referenced as a loss of surplus to either the consumer, producer, or both.
This can happen through price floors, caps, taxes, tariffs, or quotas. In the case of a tax on the supplier of a good, the supply curve will shift inward in proportion to the tax and resulting in a non-market clearing level of supply.
As a result, the price of the good increases and the quantity available decreases. Where taxes are high, businesses are more inclined to opt out of the formal sector. A study shows that higher tax rates are associated with fewer formal businesses and lower private investment.
A percentage point increase in the effective corporate income tax rate is associated with a reduction in the ratio of investment to GDP of up to 2 percentage points and a decrease in the business entry rate of about 1 percentage point.
Keeping tax rates at a reasonable level can encourage the development of the private sector and the formalization of businesses. Modest tax rates are particularly important to small and medium-sizeenterprises, which contribute to economic growth and employment but do not add significantly to tax revenue.
In Brazil, the government created Simples Nacional , a tax regime designed to simplify the collection of taxes for micro and small enterprises. Revenue collections rose by 7. Simples Nacional was also credited with increasing the revenue, profit, paid employment and fixed capital of formal-sector firms. Businesses care about what they get for their taxes. Quality infrastructure is critical for the sound functioning of an economy because it plays such a central role in determining the location of economic activity and the kinds of sectors that can develop.
Basic education increases the efficiency of each worker, and good-quality higher education and training allow economies to move up the value chain beyond simple production processes and products.
The efficiency with which tax revenue is converted into public goods and services varies around the world. Recent data from the World Development Indicators and the Human Development Index show that economies such as Ireland and Malaysia — which all have relatively low total tax rates — generate tax revenues efficiently and convert the gains into high-quality public goods and services figure 2.
The data show the opposite for Angola and Afghanistan. Economic development often increases the need for new tax revenue to finance rising public expenditure. At the same, time it requires an economy to be able to meet those needs. More important than the level of taxation, however, is how revenue is used.
In developing economies high tax rates and weak tax administration are not the only reasons for low rates of tax collection. The size of the informal sector matters as well; the tax base is much narrower because most workers in the informal sector earn very low wages. Efficient tax administration can help encourage businesses to become formally registered, thereby expanding the tax base and increasing tax revenues.
In many transition economies in the s, the failure to improve tax administration when new tax systems were introduced resulted in the uneven imposition of taxes, widespread tax evasion and lower-than-expected tax revenue.
Compliance with tax laws is important to keep the system working for all and supporting the programs and services that improve lives. One way to encourage compliance is to keep the rules as clear and simple as possible.
Overly complicated tax systems are associated with high tax evasion. High tax compliance costs are associated with larger informal sectors, more corruption and less investment. Economies with simple, well-designed tax systems are able to boost businesses activity and, ultimately, investment and employment.
Tax administration is changing as the ecosystem in which it operates becomes broader and deeper, mostly owing to the vast increase in digital information flows. Tax administrations are responding to these challenges through the introduction of new technology and analytical tools. They must rethink how they operate, offering the prospect of lower costs, increased compliance and incentives for compliant taxpayers. In , Tajikistan launched the Tax Administration Reform Project and, as a result, the country built a more efficient, transparent and service-oriented tax system.
The modernization of IT infrastructure and the introduction of a unified tax management system increased efficiency and reduced physical interactions between tax officials and taxpayers.
0コメント