An income tax is a tax To tax is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law levied on the income Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings received... in a given period of time." of individuals or business (corporations or other legal entities). Various income tax systems exist, with varying degrees of tax incidence In economics, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. Tax incidence is said to "fall" upon the group that, at the end of the day, bears the burden of the tax. The key concept is that the tax incidence or tax burden does not depend on where the revenue is collected, but on. Income taxation can be progressive A progressive tax is a tax by which the tax rate increases as the taxable base amount increases. "Progressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate. It can be applied to individual taxes or to a, proportional A flat tax is a tax system with a constant tax rate. A flat tax may also be called a tax in rem ("against the thing"), such as an excise tax on gasoline of three cents per gallon. Usually the term flat tax refers to household income (and sometimes corporate profits) being taxed at one marginal rate, in contrast with progressive or, or regressive A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. In simpler terms, a regressive tax imposes a greater burden on the poor than on the rich — there is an inverse relationship between the tax rate and the taxpayer's ability to pay as measured by assets, consumption, or. When the tax is levied on the income of companies, it is often called a corporate tax Corporate tax or company tax refers to a tax imposed on entities that are taxed at the entity level in a particular jurisdiction. Such taxes may include income or other taxes. The tax systems of most countries impose an income tax at the entity level on certain type of entities (company or corporation). Many systems additionally tax owners or, corporate income tax, or profit tax. Individual income taxes often tax the total income of the individual (with some deductions permitted), while corporate income taxes often tax net income (the difference between gross receipts, expenses, and additional write-offs). Various systems define income differently, and often allow notional reductions of income (such as a reduction based on number of children supported).
Contents |
Principles
The "tax net" refers to the types of payment that are taxed, which included personal earnings (wages A wage is a compensation, usually financial, received by workers in exchange for their labor), capital gains A capital gain is a profit that results from investments into a capital asset, such as stocks, bonds or real estate, which exceeds the purchase price. It is the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the investor. Conversely, a capital loss arises if the proceeds from the sale of a, and business income. The rates for different types of income may vary and some may not be taxed at all. Capital gains may be taxed when realized (e.g. when shares are sold) or when incurred (e.g. when shares appreciate in value). Business income may only be taxed if it is significant or based on the manner in which it is paid. Some types of income, such as interest on bank savings, may be considered as personal earnings (similar to wages) or as a realized property gain (similar to selling shares). In some tax systems, personal earnings may be strictly defined where labor, skill, or investment is required (e.g. wages); in others, they may be defined broadly to include windfalls (e.g. gambling wins).
Tax rates may be progressive, regressive, or proportional. A progressive tax taxes differentially according to how much has been earned. For example, the first $10,000 in earnings may be taxed at 5%, the next $10,000 at 10%, and any more income at 20%. Alternatively, a flat tax taxes all earnings at the same rate. A regressive income tax may tax income up to a certain amount, such as taxing only the first $90,000 earned. A tax system may use different taxation methods for different types of income. However, the idea of a progressive income tax has garnered support from economists and political scientists of many different ideologies An ideology is a set of ideas that discusses one's goals, expectations, and actions. An ideology can be thought of as a comprehensive vision, as a way of looking at things , as in common sense (see Ideology in everyday society below) and several philosophical tendencies (see Political ideologies), or a set of ideas proposed by the dominant class, from Adam Smith Adam Smith was a Scottish moral philosopher and a pioneer of political economics. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations. The latter, usually abbreviated as The Wealth of Nations, is considered his magnum opus and in The Wealth of Nations An Inquiry into the Nature and Causes of the Wealth of Nations is the masterpiece of the Scottish economist and moral philosopher Adam Smith. It was first published in 1776. It is an account of economics at the dawn of the Industrial Revolution, as well as a rhetorical piece written for the generally educated individual of the 18th century -[1] to Karl Marx Karl Heinrich Marx was a German philosopher, self-taught political economist, historian, political theorist, sociologist, communist, and revolutionary, whose ideas played a significant role in the development of modern communism and socialism. Marx summarized his approach in the first line of chapter one of The Communist Manifesto, published in 184 in The Communist Manifesto Manifesto of the Communist Party , often referred to as The Communist Manifesto, was published on February 21, 1848, and is one of the world's most influential political manuscripts. Commissioned by the Communist League and written by communist theorists Karl Marx and Friedrich Engels, it laid out the League's purposes and program. It presents an.[2]
Personal income tax is often collected on a pay-as-you-earn Pay as you earn is a withholding tax in the United Kingdom, the Republic of Ireland, and certain other nations. It is an amount collected by employers on behalf of the government from employees as a provisional payment of income tax on the employee's earnings basis, with small corrections made soon after the end of the tax year A fiscal year is a period used for calculating annual ("yearly") financial statements in businesses and other organizations. In many jurisdictions, regulatory laws regarding accounting and taxation require such reports once per twelve months, but do not require that the period reported on constitutes a calendar year (i.e., January. These corrections take one of two forms: payments to the government, for taxpayers To tax is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law who have not paid enough during the tax year; and tax refunds A tax refund or tax rebate is a refund on taxes when the tax liability is less than the taxes paid. Taxpayers can often get a tax refund on their income tax if the tax they owe is less than the sum of the total amount of the withholding taxes and estimated taxes that they paid, plus the refundable tax credits that they claim from the government for those who have overpaid. Income tax systems will often have deductions available that lessen the total tax liability by reducing total taxable income. They may allow losses from one type of income to be counted against another. For example, a loss on the stock market may be deducted against taxes paid on wages. Other tax systems may isolate the loss, such that business losses can only be deducted against business tax by carrying forward the loss to later tax years.
History
The concept of taxing income is a modern innovation and presupposes several things: a money Money is any object that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment economy An economy consists of the economic system of a country or other area, the labor, capital and land resources, and the economic agents that socially participate in the production, exchange, distribution, and consumption of goods and services of that area. A given economy is the end result of a process that involves its technological evolution,, reasonably accurate accounts Financial accountancy is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders. Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power, a common understanding of receipts, expenses and profits In accounting, profit is the difference between price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses, and an orderly society with reliable records. For most of the history of civilization Civilization is a term used to describe a certain kind of development of a human society. A civilized society is often characterized by advanced agriculture, long-distance trade, occupational specialization, and urbanism. Aside from these core elements, civilization is often marked by any combination of a number of secondary elements, including a, these preconditions did not exist, and taxes were based on other factors. Taxes on wealth Wealth is the abundance of valuable resources or material possessions or the control of such assets. The word wealth is derived from the old English wela, which is from an Indo-European word stem. An individual, community, region or country that possesses an abundance of such possessions or resources is known as wealthy, social position, and ownership of the means of production Means of production refers to physical, non-human, inputs used in production including factories, machines, and tools; along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital. They include two broad categories of objects: instruments of labour ( (typically land Real property and personal property are the main classifications of property in the common law. Real property refers to land and the improvements made by human efforts—buildings, machinery, the acquisition of various property rights, and the like. Real property is also termed realty, real estate, and immovable property and slaves Slavery is a system in which people are the property of others. Slaves can be held against their will from the time of their capture, purchase or birth, and deprived of the right to leave, to refuse to work, or to demand wages. In some societies it was legal for an owner to kill a slave; in others it was a crime) were all common. Practices such as tithing A tithe is a one-tenth part of something, paid as a (usually) voluntary contribution or as a tax or levy, usually to support a religious organization. Today, tithes (or tithing) are normally voluntary and paid in cash, cheques, or stocks, whereas historically tithes were required to be paid in kind, such as agricultural products (that grown of the, or an offering of firstfruits, existed from ancient times, and can be regarded as a precursor of the income tax, but they lacked precision and certainly were not based on a concept of net increase.
Han Dynasty The Han Dynasty was the second imperial dynasty of China, preceded by the Qin Dynasty (221–206 BCE) and succeeded by the Three Kingdoms (220–265 CE). It was founded by the peasant rebel leader Liu Bang, known posthumously as Emperor Gaozu of Han. It was briefly interrupted by the Xin Dynasty (9–23 CE) of the former regent Wang Mang. This (ancient China Chinese civilization originated in various regional centers along both the Yellow River and the Yangtze River valleys in the Neolithic era, but the Yellow River is to be said as the Cradle of Chinese Civilization. The written history of China can be found as early as the Shang Dynasty . Oracle bones with ancient Chinese writing from the Shang)
In the year 10, Emperor Wang Mang Wang Mang (45 BC – 6 October 23), courtesy name Jujun (巨君), was a Han Dynasty official who seized the throne from the Liu family and founded the Xin (or Hsin, meaning "new") Dynasty (新朝), ruling AD 9–23. The Han dynasty was restored after his overthrow and his rule marks the separation between the Western Han Dynasty (before of the Han Dynasty The Han Dynasty was the second imperial dynasty of China, preceded by the Qin Dynasty (221–206 BCE) and succeeded by the Three Kingdoms (220–265 CE). It was founded by the peasant rebel leader Liu Bang, known posthumously as Emperor Gaozu of Han. It was briefly interrupted by the Xin Dynasty (9–23 CE) of the former regent Wang Mang. This instituted an unprecedented tax -- the income tax -- at the rate of 10 percent of profits, for professionals and skilled labor. (Previously, all taxes were either head tax or property tax.) He was overthrown 13 years later in 23 CE and earlier laissez faire policies were restored during the Later Han.
Kingdom of Great Britain The Kingdom of Great Britain, also known as the United Kingdom of Great Britain, was a sovereign state in northwest Europe, in existence from 1707 to 1801. It was created by the merger of the Kingdom of Scotland and the Kingdom of England, under the Acts of Union 1707, to create a single kingdom encompassing the whole of the island of Great
Another income tax was implemented in Britain The Kingdom of Great Britain, also known as the United Kingdom of Great Britain, was a sovereign state in northwest Europe, in existence from 1707 to 1801. It was created by the merger of the Kingdom of Scotland and the Kingdom of England, under the Acts of Union 1707, to create a single kingdom encompassing the whole of the island of Great by William Pitt the Younger William Pitt, the Younger was a British politician of the late eighteenth and early nineteenth centuries. He became the youngest Prime Minister in 1783 at the age of 24 (although at this period the term Prime Minister was not used). He left office in 1801, but was Prime Minister again from 1804 until his death in 1806. He was also Chancellor of in his budget of December 1798 to pay for weapons and equipment in preparation for the Napoleonic wars The Napoleonic Wars were a series of conflicts declared against Napoleon's French Empire and changing sets of European allies by opposing coalitions that ran from 1803 to 1815. As a continuation of the wars sparked by the French Revolution of 1789, they revolutionized European armies and played out on an unprecedented scale, mainly due to the. Pitt's new graduated income tax A progressive tax is a tax by which the tax rate increases as the taxable base amount increases. "Progressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from low to high, where the average tax rate is less than the marginal tax rate. It can be applied to individual taxes or to a began at a levy of 2d The penny of the Kingdom of Great Britain and later of the United Kingdom, was in circulation from the early 18th century until February 1971, Decimal Day in the pound The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown dependencies (the Isle of Man and the Channel Islands) and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence (singular: penny) (0.8333%) on incomes over £60 and increased up to a maximum of 2s The shilling is a unit of currency used in some current and former British Commonwealth countries. The word shilling comes from schilling, an accounting term that dates back to Anglo-Saxon times where it was deemed to be the value of a cow in Kent or a sheep elsewhere. The word is thought to derive from the base skell-, "to ring/resound" (£7.11 in 2007)(10%) on incomes of over £200.(£170,542.04 in 2007) Pitt hoped that the new income tax would raise £10 million (£8,527,100,000 in 2007) but actual receipts for 1799 totalled just over £6 million (see UK income tax history Taxation in the United Kingdom may involve payments to a minimum of two different levels of government: The central government and local government. Central government revenues come primarily from income tax, National Insurance contributions, value added tax, corporation tax and fuel duty. Local government revenues come primarily from grants from for more information).[3]
United States
Main article: Income tax in the United States The federal government of the United States imposes a progressive tax on the taxable income of individuals, partnerships, companies, corporations, trusts, decedents' estates, and certain bankruptcy estates. Some state and municipal governments also impose income taxes. The first Federal income tax was imposed during the Civil War, then again inThe first United States ^ b. English is the de facto language of American government and the sole language spoken at home by 80% of Americans age five and older. Spanish is the second most commonly spoken language income tax was imposed in July 1861, at 3% of all incomes over 800 dollars in order to help pay for the war effort in the American Civil War Union blockade – Eastern – Western – Lower Seaboard – Trans-Mississippi – Pacific Coast.[4][5] This tax was repealed and replaced by another income tax in 1862. [6]
Types
Personal
A personal or individual income tax is levied on the total income of the individual (with some deductions permitted). It is often collected on a pay-as-you-earn Pay as you earn is a withholding tax in the United Kingdom, the Republic of Ireland, and certain other nations. It is an amount collected by employers on behalf of the government from employees as a provisional payment of income tax on the employee's earnings basis, with small corrections made soon after the end of the tax year A fiscal year is a period used for calculating annual ("yearly") financial statements in businesses and other organizations. In many jurisdictions, regulatory laws regarding accounting and taxation require such reports once per twelve months, but do not require that the period reported on constitutes a calendar year (i.e., January. These corrections take one of two forms: payments to the government, for taxpayers To tax is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law who have not paid enough during the tax year; and tax refunds A tax refund or tax rebate is a refund on taxes when the tax liability is less than the taxes paid. Taxpayers can often get a tax refund on their income tax if the tax they owe is less than the sum of the total amount of the withholding taxes and estimated taxes that they paid, plus the refundable tax credits that they claim from the government for those who have overpaid. Income tax systems will often have deductions available that lessen the total tax liability by reducing total taxable income. They may allow losses from one type of income to be counted against another. For example, a loss on the stock market may be deducted against taxes paid on wages.
Corporate
Main article: Corporate tax Corporate tax or company tax refers to a tax imposed on entities that are taxed at the entity level in a particular jurisdiction. Such taxes may include income or other taxes. The tax systems of most countries impose an income tax at the entity level on certain type of entities (company or corporation). Many systems additionally tax owners orCorporate tax refers to a direct tax levied by various jurisdictions on the profits made by companies or associations and often includes capital gains of a company In the United States, a company is a corporation—or, less commonly, an association, partnership, or union—that carries on an industrial enterprise." Generally, a company may be a "corporation, partnership, association, joint-stock company, trust, fund, or organized group of persons, whether incorporated or not, and any receiver,. Earnings are generally considered gross revenue minus expenses. Corporate expenses that relate to capital expenditures are usually deducted in full (for example, trucks are fully deductible in the Canadian tax system, while a corporate sports car is only partly deductible)over their useful lives by using % rates based on the class of asset they belong to.Notably, accounting rules about deductible expenses and tax rules about deductible expenses will differ at times, giving rise to book-tax differences. If the book-tax difference is carried over more than a year, it is referred to as a temporary difference, which then creates deferred tax or future assets and liabilities for the corporation, which are carried on the balance sheet.
- See also: Excess profits tax, Windfall profits tax
Payroll
Main article: Payroll taxA payroll tax generally refers to two kinds of taxes. Taxes which employers are required to withhold from employees' pay, also known as withholding, pay-as-you-earn (PAYE) or pay-as-you-go (PAYG) tax. These withholdings contribute to the payment of an employee's personal income tax obligation; if the payments exceed this obligation, the employee may be eligible for a tax refund or carryforward to future periods.
Other group of payroll taxes are paid from the employer's own funds, either as a fixed charge per employee or as a percentage of each employee's pay. Payroll taxes often cover government social insurance programs such as social security, health care, unemployment, and disability. These payments do not count towards income taxes of employees and employers, but are normally deductible by the employer..
Inheritance
Main article: Inheritance taxThe inheritance tax, estate tax and death duty are the names given to various taxes which arise on the death of an individual. In international tax law, there is a distinction between an estate tax and an inheritance tax: the former taxes the personal representatives of the deceased, while the latter taxes the beneficiaries of the estate. However this distinction is not always respected. For example, the "inheritance tax" in the UK is a tax on personal representatives, and is therefore, strictly speaking, an estate tax.
Capital gains tax
Main article: Capital gains taxA capital gains tax is the tax levied on the profit released upon the sale of a capital asset. In many cases, the amount of a capital gain is treated as income and subject to the marginal rate of income tax. However, in an inflationary environment, capital gains may be to some extent illusory: if prices in general have doubled in five years, then selling an asset for twice the price it was purchased for five years earlier represents no gain at all. Partly to compensate for such changes in the value of money over time, some jurisdictions, such as the United States, give a favorable capital gains tax rate based on the length of holding. European jurisdictions have a similar rate reduction to nil on certain property transactions that qualify for the participation exemption. In Canada, 20–50% of the gain is taxable income. In India, Short Term Capital Gains Tax (arising before 1 year) is 10% [15 % from F.Y 2008-09 as per Finance Act 2008] flat rate of the gains and Long Term Capital Gains Tax is nil for stocks & mutual fund units held 1 year or more, provided the sale of shares involved payment of Securities Transaction Tax and 20% for any other assets held 3 years or more.
Around the world
Main article: Tax rates around the worldIncome taxes are used in most countries around the world. The tax systems vary greatly and can be progressive, proportional, or regressive, depending on the type of tax. Comparison of tax rates around the world is a difficult and somewhat subjective enterprise. Tax laws in most countries are extremely complex, and tax burden falls differently on different groups in each country and sub-national unit. Of course, services provided by governments in return for taxation also vary, making comparisons all the more difficult.
Critique
Critics have stated that income tax systems can penalize work, discourage saving and investment, hinder the competitiveness of business[7] and economic growth[8]. Income taxes are not border-adjustable; meaning the tax component embedded into products via taxes imposed on companies cannot be removed when exported to a foreign country (see Effect of taxes and subsidies on price). Taxation systems such as a national sales tax or value added tax remove the tax component when goods are exported and apply the tax component on imports.[9] The principles of an income tax are also argued by critics. Frank Chodorov wrote "... you come up with the fact that it gives the government a prior lien on all the property produced by its subjects." The government "unashamedly proclaims the doctrine of collectivized wealth. ... That which it does not take is a concession."[5]
Transparency / Public Disclosure
Public disclosure of personal income tax filings occurs in Finland and Norway — and it was once practiced in the United States as well.[10]
See also
Find more about Income tax on Wikipedia's sister projects:
Definitions from Wiktionary Textbooks from Wikibooks Quotations from Wikiquote Source texts from Wikisource Images and media from Commons News stories from Wikinews Learning resources from Wikiversity- Lifetime income tax
- Local income tax
- Negative income tax
- Income tax in the United States
- Income tax in the Netherlands
Notes
- ^ Adam Smith, An Inquiry into the Nature And Causes of the Wealth of Nations (1776). Book Five: Of the Revenue of the Sovereign or Commonwealth. CHAPTER II: Of the Sources of the General or Public Revenue of the Society. Article I: Taxes upon the Rent of House; Article II: Taxes on Profit, or upon the Revenue arising from Stock; Taxes upon as Profit of particular Employments; Article III: Taxes upon the Wages of Labour. [1]
- ^ Marx, Karl (1848-02-21). "Section II. Proletarians and Communists". Communist Manifesto. http://www.hartford-hwp.com/archives/26/manifesto/176-2.html. Retrieved 2007-01-24.
- ^ "A tax to beat Napoleon". HM Revenue & Customs. http://www.hmrc.gov.uk/history/taxhis1.htm. Retrieved 2007-01-24.
- ^ Revenue Act of 1861, sec. 49, ch. 45, 12 Stat. 292, 309 (Aug. 5, 1861).
- ^ a b Young, Adam (2004-09-07). "The Origin of the Income Tax". Ludwig von Mises Institute. http://mises.org/story/1597. Retrieved 2007-01-24.
- ^ Sections 49, 51, and part of 50 repealed by Revenue Act of 1862, sec. 89, ch. 119, 12 Stat. 432, 473 (July 1, 1862); income taxes imposed under Revenue Act of 1862, section 86 (pertaining to salaries of officers, or payments to "persons in the civil, military, naval, or other employment or service of the United States ...") and section 90 (pertaining to "the annual gains, profits, or income of every person residing in the United States, whether derived from any kind of property, rents, interest, dividends, salaries, or from any profession, trade, employment or vocation carried on in the United States or elsewhere, or from any other source whatever....").
- ^ "America Needs a Better Tax System". The President’s Advisory Panel on Federal Tax Reform. 2005-04-13. http://www.taxreformpanel.gov/04132005.pdf. Retrieved 2007-01-28.
- ^ The Economist. 19 November 2009. http://www.economist.com/opinion/displaystory.cfm?story_id=14924473. Retrieved 20 November 2009.
- ^ Linbeck, Leo (2006-06-22). "Testimony Before the Subcommittee on Select Revenue Measures". House Committee on Ways and Means. http://waysandmeans.house.gov/hearings.asp?formmode=view&id=5196. Retrieved 2006-08-11.
- ^ BERNASEK, ANNA (February 13, 2010). "Should Tax Bills Be Public Information?". The New York Times. http://www.nytimes.com/2010/02/14/business/yourtaxes/14disclose.html. Retrieved 2010-03-07.
External links
Categories: Income taxes | Personal taxes | Taxation
|
Tue, 27 Jul 2010 09:26:34 GMT+00:00
change Appleton Post Crescent And others who do, may be reluctant to join the program because they would forfeit their property tax deduction on their federal income tax return in the ...
416px x 657px | 116.10kB
[source page]
in a lie on his Return Canadiana | Fiscal Reports |
Kian Ganz
Mon, 19 Jul 2010 04:54:12 GM
A Mumbai . Income Tax. Appellate Tribunal (ITAT) has found that Linklaters should pay . income tax. in India on all India-related profits after applying a retrospective Finance Bill 2010 amendment to section 9(1) of the . Income Tax. Act, ...
Q. My monthy earning will be gross (1,30,000) and net (1,10,000). Kindly help me to calculate my income tax. Thank You.
Asked by blue - Mon Nov 5 23:26:27 2007 - - 4 Answers - 1 Comments
A. Mr Sri niwas , Medical allowance is taxable. Please make your facts correct
Answered by manishax6in - Tue Nov 6 04:56:46 2007
