We explain what taxes are, the elements that make them up and the types that exist. Also, what is its function and various examples.
What are taxes?
Taxes, charges or tributes are a payment obligation that the State imposes on its citizens without there being a direct consideration of goods or services. Its primary purpose is to finance public sector activities that are of common benefit.
All citizens of a State must, in one way or another, comply with the payment of certain taxes. For this the principle of contributory capacity is used which establishes those who have more resources, must provide a greater amount of resources than those less favored, in order to achieve a society with more social and economic equity.
Those who fail to pay taxes are punished by the State itself, either through fines and new impositions or, eventually, prison sentences, as established by the tax law of said nation. The specific regulation of taxes of a nation is known as the tax system or fiscal system.
What are taxes for?
Taxes, as we have said, in principle serve to financially support the State. Along with public companies and income of other types, collection is the mechanism par excellence for financing the public, so that, among all the citizens of a country, they support activities that are of common benefit and that do not have purposes of profit.
However, taxes can also serve other purposes, such as discourage certain consumption dynamics in what are usually considered internal protection mechanisms (or protectionist measures).
In these cases, the State places taxes on certain imported products to increase their cost and thus defend local producers, who otherwise would not be able to compete commercially. Taxes can also be assigned to make certain types of products considered harmful to health or whose consumption seeks to be discouraged, such as cigarettes or alcohol, more expensive.
Finally, taxes on income and sudden profits are intended to allocate to the State a portion of the money earned by the richest in society or by those who win bets or the lottery, in order to do so. fight against the concentration of capital in a single social class or a small group of people.
Tax elements
Every tax consists of the following elements:
- Taxable event. It is the motivation for the tax, that is, the reason why we must pay.
- Passive subject. They are all persons (natural or legal) who must face the obligation to pay taxes.
- Tax base. The amount on which the taxes payable are calculated.
- Type of lien. The proportion or percentage that is calculated, depending on the case, using formulas that govern how and how much should be paid.
- Tax fee. Finally, it is the amount to pay for taxes.
Types of taxes
There are different types of taxes and different ways of classifying them, for example:
Depending on your tax type:
- Proportional or flat taxes Those that always impose a fixed rate or percentage, regardless of the context of what is taxed.
- Progressive taxes Those that increase the tax calculation percentage as the profit or income increases.
- Regressive taxes Those that reduce the tax calculation percentage as the profit or income increases.
According to your taxable event:
- Direct taxes Those that tax sources of wealth, property or income, such as taxes on income, or on the possession of certain assets.
- indirect taxes Those that tax consumption, without affecting the income of a taxpayer, but adding to the price of a good or service, as is the case of the value added tax, or the tax on tobacco and alcohol.
According to your considerations regarding the taxable person:
- Objective taxes Those that do not take into account the conditions of the taxpayer when calculating their tax liability.
- Subjective taxes Those that allow the taxpayer to demonstrate mitigating circumstances, other types of obligations and justify a reduction or a different calculation in their tax liability.
According to its temporality:
- Instant taxes Those that are charged at the moment of carrying out a commercial operation, generally because they are already incorporated into the final price of the product or service.
- Periodic taxes Those that must be paid within certain limits or periods established by the State and announced in advance, so that the taxpayer can receive discounts for timely payment or surcharges for late payment.
Tax Examples
Some common examples of taxes are:
- Value Added Tax (VAT) Also known as Value Added Tax or Tax on Reduced Value, it is an indirect and regressive tax, which is usually imposed on goods and services that are not essential nor are they part of the basket of protected products, if any.
- Wealth tax Sometimes called Wealth Tax or Fortune Tax, it is an individual tax calculated on the personal assets of natural persons or individuals, estimating a total value of absolutely all the assets they possess.
- Income tax This tax is perhaps the most important of any tax system, and is imposed on the profits and profits of natural and legal persons, whether in a flat, progressive or regressive manner. It generally has a taxable minimum that prevents the people who earn the least money in society from being charged.
- Inheritance and donation tax As its name indicates, this tax is levied on assets acquired through inheritances, gifts, legacies or donations, as long as they meet certain legal requirements, such as free receipt or mortis cause (that is, after the death of another).
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References
- “Tax” on Wikipedia.
- “What is a tax?” in Debitoor, accounting glossary.
- “Tax” in Economipedia.
- “What are Taxes?” on Investopedia.
- “Taxation” in The Encyclopaedia Britannica.
