Taxation and tax system

Taxes are a compulsory financial contribution by a person or body of persons towards the expenditure of a public authority. Taxation is the process by which people pay the expenses of carrying on the government. In modern economies taxes are the most important source of government revenues. Taxes on income (i.e. on wages, profits, dividends, rent and interest) and on capital are known as “direct” taxes. Taxes on goods and services are “indirect” ones.

A progressive tax is when more paid as income rises. A tax is proportional if the rate of taxation remains the same, whether it is applied to a small sum or a large one. The tax on houses and farms is an example of a proportional tax because the rate is the same whether the house or farm is large or small.

Indirect taxes are paid on goods or services. The taxes are paid by shops or manufactures. In the UK the Value Added Tax is the most important indirect tax.

Businesses and individuals are subject to many forms of taxes. Taxes may be identified according to the base on which they are applied. For example, the property tax is levied on land, buildings and personal property. The inheritance tax is placed on the value of property a person inherits. The estate tax is placed on an estate before it is divided among the heirs. Sales tax may apply to all kinds of sales. If sales are placed on luxury goods they are called luxury taxes.

Excise taxes are those placed on a specific commodity by the government. Tobacco and liquor taxes are excise taxes. Customs duties are taxes placed on the importation of goods from outside the country. A license tax is one placed on the right to do something: to sell tobacco, to get married, to own a dog or go hunting.

The government of a country needs to raise taxes in order to provide goods and services that will be shared by consumers.

compulsory financial contribution – обязательный финансовый взнос

revenues - доходы

levy / impose – взимать, облагать

be subject to - подлежать