The taxes is one of the oldest financial sources of the state, which is of great importance; it constitutes a percentage of the state’s public revenues and is used as a source of financing for public works and services and the establishment of the state’s infrastructure. Therefore, one of the most important things that the tax seeks to do is improve the general economy in the state, taking into account the existence of a difference between the types of tax and the fact that there are many opinions about it. Therefore, this article will elaborate on it, starting with its concept, types, and principles and ending with its objectives.

What is the concept of tax?

A tax is a mandatory financial contribution imposed on individuals or companies by the state. The government, whether local, regional, or national, represents the tax, and the tax aims to finance government activities such as public works and services such as roads and schools, or to fund specific programs such as social security programs or health care, and the tax, depending on its type, is part of the profits or money of taxpayers who meet certain conditions.Taxes are imposed on them because they are taken and transferred to the government through a department or agency to collect them. Paying the tax at the rates imposed by the government is mandatory for those who are entitled to it, and tax evasion is punishable by law.

What are the types of tax?

The tax is mainly divided into three categories: income taxes, property taxes, and taxes on goods and services, as follows:

Taxes on income

This tax is imposed on the various incomes earned by the individual or the company, and the rate of this tax is progressive, that is, the higher the income (revenue), the higher the tax rate. This type of tax can be divided into four sections:

Income taxes at the individual level

This tax is imposed on salaries, individual income, or personal investment, and many governments seek to provide systems to individuals whose goal is to help reduce the tax bill by providing discounts and offers within a specific framework.

corporate income taxes

This tax is payable only on the net income of companies, and their net income is their profits minus their costs.

payroll taxes

These are taxes that the employer deducts from the wages and salaries of his employees during the period of their work and payment of wages, and this collected tax is used for the purposes of financing the social security system in the state and providing health care.

capital gains taxes

They are taxes paid on any profit made from the sale of an asset, and they usually apply to:

Home sales.
stock transactions.
Bond transactions.
The higher the amount of income from this profit, the higher the tax value.

Taxes on property

This tax is imposed on the value of real estate or other personal property and is collected on a recurring basis, such as when homeowners pay a property tax once a year, annually, recurringly, or in parts and pay it monthly. The tax on real estate is variable in most tax systems depending on the change in the market value of the property. Or change the condition of the property itself. It is common for property tax to fall on other items such as cars, boats, recreational vehicles, and aircraft, and some systems may impose this tax on commercial properties such as factories.

Taxes on goods and services

This type of tax is the most widely used in the countries of the world, and it constitutes a high percentage of tax revenues for countries. It can be divided into several sub-types, explained as follows:

sales tax

This tax represents a high percentage of tax revenue because it is imposed on sales, retail, and sales services that are widespread at the state level. It is worth noting that the percentage of these taxes varies according to the type of item being purchased, and this tax may not be imposed at all on some commodities, such as basic commodities, and that views may differ on this tax. Some see sales taxes as the fairest form of taxes because they are voluntary and depend on the rate of consumption, while others believe that it is a regressive tax, which means that it is the poor who pay the bulk of their income for this tax compared to the rich.

Excise taxes

It depends on the quantity of the item consumed rather than its value, such as imposing a tax on each gas bottle purchased without regard to the price charged by the seller.

User fee

They are taxes imposed on a wide range of services provided, such as:

flight tickets.
Rental cars.
The facilities.
Hotel rooms.
licenses.

Luxury taxes

It is imposed on certain luxury items, such as cars and expensive jewelry.

Sin taxes

It is imposed on harmful items such as cigarettes and alcohol, and this tax has a great value because it encourages its consumers to quit because of its great damage.

What are the principles of tax?

These are the principles and issues that the taxpayer must consider and apply when enacting the tax system.These principles include the following:

Broad application

The tax should include and apply to the largest possible number of residents or individuals and in such a way that no excessive taxation is imposed on any person, entity, or class, thus making the tax burden evenly distributed.

Ease of compliance

That is, the administration of taxes should be as simple as possible, so that the taxpayer does not have much difficulty in complying with the requirements for paying taxes, and in the best cases, the tax process should be invisible and unobtrusive to the taxpayer.

Expenditure matching

The level of taxes levied should roughly match the amount of expected expenditures, ensuring that the tax system covers the necessary costs and expenditures without overtaxing any category.

Fairness in the application

All taxpayers of the same economic status bear an equal burden of tax, yet the tax should not prefer one class to another so that one class obtains a tax advantage at the expense of another, to the detriment of the other.

Limited exemptions

As a result, tax breaks are only available for a limited time and for a specific purpose, and their goal is to encourage certain types of behavior, which frequently involves economic development.

low cost of collection

The required cost of tax collection should be low so that the output of tax collection is as high as possible.

Understandability

So that the taxpayer’s understanding of the value of the tax and the method of payment is simple; if this understanding does not exist, errors in the transferred tax amount may occur, as well as other problems.

What are the tax objectives?

For taxpayers, taxes may appear as an exploitation of their income, especially if signs of corruption and personal interests appear in the tax-legislating authorities, but if the tax and its revenues are used wisely and in a proper manner, they will be of great importance to citizens, and the following are five main objectives that explain the reasons for governments and regulations regarding taxation:

Generate revenue for the government.

This is the most important goal for imposing taxes in the state. The result of collecting various taxes from individuals, companies, and goods is a lump sum of money that the government needs to achieve its purposes and finance its expenses. In return for what they pay, taxpayers expect the provision of social infrastructure that includes building schools, hospitals, roads, bridges, and others.

Ensures economic development

Tax is a useful tool for achieving economic development in a country. By giving the government tax concessions to start-up companies, they are exempt from paying taxes until they expand and start making reasonable amounts of profits, and the company will then be able to use this additional income to grow and expand, which contributes to achieving economic development within the country.

Redistribution of income

Tax experts believe that the redistribution of income due to taxes takes place in two ways. Either taxes force people to work harder to earn more money to satisfy their needs and wants, or taxes are introduced gradually so that the rich pay more and the poor pay less.

Aids bilateral trade agreements within countries

The tax system can help achieve bilateral agreements between countries, and these agreements may include reducing the tax on goods exchanged between countries and providing concessions that encourage trade between them.

Use to manage a country’s economy

Taxes are one of the most powerful tools for managing a country’s economy. They may be used to avoid dumping dangerous goods in the country or to prevent the consumption of goods that the government wants to prevent its citizens from consuming, so that the government can run its economy in order to improve people’s lives.

Tax concept and purpose of taxes