Tax

A tax is a mandatory financial charge or levy imposed on an individual or legal entity by a governmental organization to support government spending and public expenditures collectively or to regulate economic activity through measures designed to mitigate negative externalities. Tax compliance refers to policy actions and individual behavior aimed at ensuring that taxpayers are paying the right amount of tax at the right time and securing the correct tax allowances and tax relief.HMRC, About compliance checks, CC/FS1a, accessed 31 January 2022

In economic terms (circular flow of income), taxation transfers wealth from households or businesses to the government. This affects economic growth and welfare, which can be increased (known as fiscal multiplier) or decreased (known as excess burden of taxation).

Certain countries (usually small in size or population, which results in a smaller infrastructure and social expenditure) function as tax havens by imposing minimal taxes on the personal income of individuals and corporate income. These tax havens attract capital from abroad (particularly from larger economies) while resulting in loss of tax revenues within other non-haven countries (through base erosion and profit shifting). History

The first known system of taxation was in Ancient Egypt around 3000–2800 BC, in the First Dynasty of the Old Kingdom of Egypt.Taxes in the Ancient World, University of Pennsylvania Almanac, Vol. 48, No. 28, 2 April 2002 The earliest and most widespread forms of taxation were the corvée and the tithe: The corvée was forced labor provided to the state by peasants too poor to pay other forms of taxation (labor in ancient Egyptian is a synonym for taxes). Records from the time document that the Pharaoh would conduct a biennial tour of the kingdom, collecting tithes from the people.Olmert, Michael (1996). Milton's Teeth and Ovid's Umbrella: Curiouser & Curiouser Adventures in History, p. 41. Simon & Schuster, New York. . The Rosetta Stone, whose decipherment led to the contemporary understanding of hieroglyphics, was itself a decree issued by Ptolemy V that contained tax concessions.

Early examples of taxation are also seen in the Bible,Chapter 47, verse 24 – the New International Version ancient Vedic texts, the Bronze-age Hittite Empire, and the Persian Empire.

Roman and civil law In the Roman Republic, taxes were collected from individuals at the rate of between 1% and 3% of the assessed value of their total property. However, since it was extremely difficult to facilitate the collection of the tax, the government auctioned it every year. The winning tax farmers (called publicani) paid the tax revenue to the government in advance and then kept the taxes collected from individuals. The publicani paid the tax revenue in coins, but collected the taxes using other exchange media, thus relieving the government of the work to carry out the currency conversion themselves. The revenue payment essentially worked as a loan to the government, which paid interest on it. Although this scheme was a profitable enterprise for the government as well as the publicani, it was later replaced by a direct tax system by the emperor Augustus; after which, each province was obliged to pay 1% tax on wealth and a flat rate on each adult. This brought about regular census and shifted the tax system more towards taxing an individual's income rather than wealth.

Islamic law Islamic rulers imposed Zakat (a tax on Muslims) and Jizya (a poll tax on conquered non-Muslims).

Modern history Numerous records of government tax collection in Europe since at least the 17th century are still available today. But taxation levels are hard to compare to the size and flow of the economy since production numbers are not as readily available.Hoffman, Phillipe and Kathryn Norberg (1994), Fiscal Crises, Liberty, and Representative Government, 1450–1789, p. 238. Taxation as a percentage of production of final goods may have reached 15–20% during the 17th century in places such as France, the Netherlands, and Scandinavia.

During the war-filled years of the eighteenth and early nineteenth century, tax rates in Europe increased dramatically as war became more expensive and governments became more centralized and adept at gathering taxes. This increase was greatest in England.Peter Mathias and Patrick O'Brien found that the tax burden increased by 85% over this period. Another study confirmed this number, finding that per capita tax revenues had grown almost sixfold over the eighteenth century, but that steady economic growth had made the real burden on each individual only double over this period before the industrial revolution. Effective tax rates were higher in Britain than France in the years before the French Revolution, but they were mostly placed on international trade. In France, taxes were lower but the burden was mainly on landowners, individuals, and internal trade and thus created far more resentment.Hoffman, Phillipe and Kathryn Norberg (1994), Fiscal Crises, Liberty, and Representative Government, 1450–1789, p. 300 .

Obsolete forms Obsolete forms of taxation include: In monetary economies prior to fiat banking, a critical form of taxation was seigniorage, the tax on the creation of money. Scutage, which is paid in lieu of military service; strictly speaking, it is a commutation of a non-tax obligation rather than a tax as such but functioning as a tax in practice. Tallage, a tax on feudal dependents. Tithe, a tax-like payment (one-tenth of one's earnings or agricultural produce), paid to the Church (and thus too specific to be a tax in strict technical terms). This should not be confused with the modern practice of the same name which is normally voluntary. (Feudal) aids, a type of tax or due that was paid by a vassal to his lord during feudal times. Danegeld, a medieval land tax originally raised to pay off raiding Danes and later used to fund military expenditures. Carucage, a tax which replaced the Danegeld in England. Tax farming, the principle of assigning the responsibility for tax revenue collection to private citizens or groups. Socage, a feudal tax system based on land rent. Burgage, a feudal tax system based on land rent.

Taxonomy and classification The Organisation for Economic Co-operation and Development (OECD) publishes an analysis of the tax systems of member countries. As part of such analysis, OECD has developed a definition and system of classification of internal taxes.

+ OECD Interpretative Guide tax codes and classifications 1000 Taxes on income, profits and capital gains of individuals and corporations 1100 Taxes on income, profits and capital gains of individuals 1110 Taxes on income and profits of individuals 1120 Taxes on capital gains of individuals 1200 Corporate taxes on income, profits and capital gains of corporations 1210 Taxes on income and profits of corporations 1220 Taxes on capital gains of corporations 1300 Unallocable between taxes on income, profits and capital gains of individuals and corporations 2000 Social security contributions (SSC) 2100 Social security contributions (SSC) by employees 2110 Social security contributions (SSC) by employees, payroll basis 2120 Social security contributions (SSC) by employees, income tax basis 2200 Social security contributions (SSC) by employers 2210 Social security contributions (SSC) by employers, payroll basis 2220 Social security contributions (SSC) by employers, income tax basis 2300 Social security contributions (SSC) by self-employed or non-employed 2310 Social security contributions (SSC) by self-employed or non-employed, payroll basis 2320 Social security contributions (SSC) by self-employed or non-employed, income tax basis 2400 Social security contributions (SSC) unallocable between employees, employers and self-employed or non-employed 2410 Social security contributions (SSC) unallocable between employees, employers and self-employed or non-employed, payroll basis 2420 Social security contributions (SSC) unallocable between employees, employers and self-employed or non-employed, income tax basis 3000 Taxes on payroll and workforce 4000 Taxes on property 4100 Recurrent taxes on immovable property 4110 Recurrent taxes on immovable property of households 4120 Recurrent taxes on immovable property paid by agents other than households 4200 Recurrent taxes on net wealth 4210 Recurrent taxes on net wealth of individuals 4220 Recurrent taxes on net wealth of corporations 4300 Estate, inheritance and gift taxes 4310 Estate and inheritance taxes 4320 Gift taxes 4400 Taxes on financial and capital transactions 4500 Other non-recurrent taxes on property 4510 Other non-recurrent taxes on property on net wealth 4520 Other non-recurrent taxes on property other than on net wealth 4600 Other recurrent taxes on property 5000 Taxes on goods and services 5100 Taxes on production, sale, transfer, leasing and delivery of goods and rendering of services 5110 General taxes on goods and services 5111 Value added taxes (VAT) 5112 Sales taxes 5113 Turnover and other general taxes on goods and services 5120 Taxes on specific goods and services 5121 Excises 5122 Profits of fiscal monopolies 5123 Customs and other import duties 5124 Taxes on exports 5125 Taxes on investment goods 5126 Taxes on specific services 5127 Other taxes on international trade and transactions 5128 Other taxes on specific goods and services 5130 Unallocable between general taxes and taxes on specific goods and services 5200 Taxes on use of goods, or on permission to use goods or perform activities 5210 Recurrent taxes on use of goods, or on permission to use goods or perform activities 5211 Recurrent taxes on motor vehicles, paid by households 5212 Recurrent taxes on motor vehicles, paid by others 5213 Recurrent taxes on use of goods, or on permission to use goods or perform activities, other than motor vehicles 5220 Non-recurrent taxes on use of goods, or on permission to use goods, or perform activities 5300 Unallocable between taxes on production, sale, transfer, leasing and delivery of goods and rendering of services and taxes on use of goods, or on permission to use goods, or perform activities 6000 Other taxes 6100 Other taxes paid solely by business 6200 Other taxes paid by other than business, or unidentifiable

Income tax

Negative income tax

Capital gains

Corporate

Social-security contributions Many countries provide publicly funded retirement or healthcare systems.

Payroll or workforce

Property Property taxes

In contrast with a tax on real estate (land and buildings), a land-value tax (LVT) is levied only on the unimproved value of the land ("land" in this instance may mean either the economic term, i.e., all-natural resources, or the natural resources associated with specific areas of the Earth's surface: "lots" or "land parcels"). Proponents of the land-value tax argue that it is economically justified, as it will not deter production, distort market mechanisms or otherwise create deadweight losses the way other taxes do.

In a number of jurisdictions (including multiple American states), there is a general tax levied periodically on residents who own personal property (personalty) within the jurisdiction. Vehicle and boat registration fees are subsets of this kind of tax. The tax is often designed with blanket coverage and large exceptions for things like food and clothing. Household goods are often exempt when kept or used within the household. Any otherwise non-exempt object can lose its exemption if regularly kept outside the household. Thus, tax collectors often monitor newspaper articles for stories about wealthy people who have lent art to museums for public display, because the artworks have then become subject to personal property tax. If an artwork had to be sent to another state for some touch-ups, it may have become subject to personal property tax in that state as well.