Taxation Essay Example | Topics and Well Written Essays - 750 words - 2

Taxation - Essay Example Taxation in essence is a system created in order to fuel the society, a manner of giving back to society for its protection. This however is not the case in modern times. Governments use taxation to run the national affairs. One thing which has still not changed is using taxation to fund wars. This practice was carried out by empires thosands of years ago and is still in pratice today. An income tax is a tax levied on the income of corporations or individuals. The amounts of tax is determined by not a fixed amount but by a percentage. This means that the tax would increase as the income increase. In most economies there are different tax brackets. This would mean that a certain percentage would be charged for an income of a certain level, however as the income would cross that threshold the tax rate would increase. There are four different types of income taxes based on sources of funds accquired i.e. personal income tax, corporate income tax, capital gain tax, payroll tax and inheretence tax. The idea of income tax is not just to aquire money to run the society (government) but also to keep a check on earnings of the rich. This system of check and balance ensures that a share is given back to welfare of state. Inflation is also controlled through this mechanism. Moreover incomes taxes can be progressive, regressive or proportional. Sales tax is a form of consumption tax. Unlike the income tax it is not applicable when you earn but only when you spend. This is because although the tax is paid by sellers of commodities, it is not in fact actually paid by them. A typical example can be buying your favorite perfume from a shopping mall. When the payment is made there is a few extra pounds charged above the selling price. This is the sales tax; the perfume seller will pay this amount to the government. The income tax would still apply on the seller on his profits and would be collected separately. Adam Smith