Tax is defined as a mandatory fee that is imposed by a government agency on individuals and companies or falls on the person who pays the tax burden; as commercial enterprises or end consumers of the enterprise’s goods, to finance government activities; Such as funding of public works and services.
The imposition of the tax aims to improve the country’s economy. Taxes are collected in the form of revenue funds earned from salaries or capital gains due to the increase in the value of the investment, or dividends. It is worth noting that evasion Taxation is a crime punishable by law.
Basic types of taxes:
1- Taxes on things acquired
Taxes on acquired things include the following taxes:
Individual Income Taxes: These are taxes levied on salaries, wages, or personal investments of individuals and families, and individual income taxes increase with the increase in income. Corporate Income Taxes Governments impose this type of tax on the revenue and profits of companies from sales minus the cost of the business. Payroll Taxes These are the taxes imposed on salaries to finance social insurance programs. The value of the payroll tax is deducted by the employer with the knowledge of the employees in the payment of wages. Capital Gains Taxes; These taxes are levied on all personal property; Such as stocks, bonds, jewelry, cars, arts, and others.
2- Consumer taxes
Consumer taxes include sales taxes; It is a tax levied on retail and sales services. Gross Receipts Taxes; They are the taxes imposed on the company’s total sales at every stage of production, regardless of profits and without excluding business expenses; Because it causes considerable losses in the early years. Value-Added Taxes It is a consumption tax added to the value of producing a good or service in all its stages. The final consumer pays it only under the value-added tax, and the consumer cannot object to it. Excise Taxes They are taxes levied on a specific commodity or activity on a large scale; Such as those imposed on gasoline, as well as on goods that cause collateral damage, and the aim is to reduce their consumption; Like the tax imposed on cigarettes in the hope of reducing their consumption, it is also charged as a consumption fee for the user, such as the gas tax.
3- Property taxes
Property taxes include the following: property taxes; These are taxes imposed on immovable property, such as land and buildings. Paid from the estate itself before the distribution of assets to the heirs, and cannot be avoided through the transfer of property before the end. Wealth taxes are taxes levied on an individual’s net worth annually, minus any outstanding debts.
Direct and indirect taxes:
There are many disputes regarding the differentiation between direct and indirect taxes, and the two terms can be distinguished through the following: Direct Taxes; Taxes that cannot be transferred from the person or entity that pays the tax to another party and are primarily the taxes of the persons charged with delivering the tax; such as income, consumption, or wealth taxes. Indirect taxes: are taxes that can be transferred from the person or entity that pays the tax to another party and are levied on the consumption of goods or production or transactions, such as sales taxes, value-added, or taxes imposed on Legal transactions, customs, or import fees.
Taxes passed through history in many stages, as follows: Taxes were imposed for the first time before about 3000 BC in Egypt, and some ancient practices of tax collection were mentioned in the Bible, where Pharaoh sent many collectors to take approximately one-fifth of the total grain crops from the farmers as a tax. Tax practices developed with the onset of Greek civilization, as a large part of Europe, North Africa, and the Middle East began to be taxed. The Rosetta Stone was discovered in 1799 AD, and it is a decree written on a clay tablet that stipulates some of the new tax laws issued by the Ptolemaic dynasty in 196 BC. New taxes were imposed in the Middle Ages, specifically in Roman times, where they were set on inheritance, consumer goods, and property to finance wars and supply them with the necessary equipment and tools. Taxes began to grow increasingly during and after the First World War, during the period from 1920 – 1980 AD, which led to an increase in national income, and thus an increase in government spending on public services, especially in education and health care. Tax stability began after 1980, but the tax rate varied from one country to another. Direct taxes increased in the twentieth century more than other sources of tax for the governments of European countries.
There are several objectives of taxation, which are as follows:
Economic development: taxes contribute to increasing the capital in the state and increasing the proportion of national income savings; This boosts public and private investments. Total employment: lowering the tax rate leads to higher incomes and increased employment; Consequently, the demand for goods and services increases, and this, in turn, contributes to stimulating investment. Price stability: by controlling inflation and controlling private spending, which leads to reducing pressure on the commodity market, which is dominated by indirect taxes, as higher prices reduce consumption, but it encourages saving—monitoring the imports of some commodities: by imposing customs duties to promote local production. The non-revenue objective: This is represented by introducing a progressive tax system, which contributes to reducing inequalities in income and wealth by imposing higher taxes on the rich than the poor.
Tax Policy Principles:
The principles of tax policy are as follows: Neutrality: especially between different commercial activities; This is to ensure efficiency to achieve the optimal distribution of the means of production. Efficiency: by reducing the costs of business and government administration as much as possible. Certainty and simplicity: to facilitate the understanding of tax rules for individuals and businesses to make optimal public policy decisions. Equity: This principle has two main components: Horizontal justice: which indicates that all taxpayers should bear similar tax burdens in similar circumstances. Vertical justice: Its definition varies from one side to another, but it can be agreed that taxpayers should pay a more significant part of the tax burden as a percentage of their income if their conditions are better than others.
Taxes around the world:
The collection of taxes from citizens and state institutions has been an essential economic feature in the past two centuries. Long-term statistics show that countries have increased tax development rates by increasing the focus on tax rules on a large scale, in addition to changing tax patterns. According to previously conducted studies, total revenues constitute. Taxes account for more than 80% of total government revenue in nearly half of the world’s countries. Tax patterns vary in developing and developed countries, where the value of taxes collected in developed countries by relying on income taxes is much greater than the taxes collected by developing countries based on commercial and consumer taxes, and this is due to the extent of the strength of political institutions that affect economic activity and how taxes are collected.