Institutional Affiliation

Title
Author`s Name
Institutional Affiliation
Introduction
Definition
Tax, is a fee levied by an authority of a particular place, to the inhabitants of that geographical region. Tax is normally settled in monetary terms, though in some circumstances, it may be settled in terms of labour, paid labour. It is worth noting that taxes are not paid by volition of the people or corporations in which it has been imposed, but rather, it is a mandatory financial burden, such that failure to pay is a criminal offence, punishable by law.
Tax rate
Taxes are usually expressed as a percentage, and this percentage charged is referred to as the tax rate. This percentage may be charged on the personal income of an individual, the income of a corporation, goods imported, goods sold to final consumers, manufactured goods, in roads (toll stations), and in many other forms and places. This rate will vary with varying administrators of the tax. Two expressions used when talking about tax rate are, the effective rate, and the marginal rate. The effective rate is the fraction of the total amount of the tax paid, to the total amount that the tax rate is applied. The marginal rate, is the tax rate that is paid on the additional one unit of the currency being used, say the dollar.
Purpose of taxation
Governments will impose taxes because of various purposes; to raise money to meet its budget, to finance wars in which the government is involved in, to try and discourage some trends or externalities, for example, cigarette tax is imposed to discourage smoking while carbon tax is imposed to discourage pollution of the environment. Some taxes are imposed to protect domestic industries from competition, and this practice is most common in less developed and developing economies. The money raised from taxation may be used for development projects in the country, as well as settling of the external debt, also in the funding of the welfare of the society, and recreational facilities. The purpose of taxation can therefore be classified in four main categories; revenue, where taxes are imposed to raise money for the government, redistribution, where the government attempts to transfer wealth from the haves, to the have-nots, in the society. Reprising, which is done to try and discourage externalities, and representation, which is historically, more of a bargain between rulers and subjects, where rulers tax the subjects, and the rulers have in turn, to be accountable to the subjects.
Types of taxes
There are two broad classifications of taxes: tax may be direct, or indirect. Direct taxes target the individual traits of the tax payer, an example is the income tax. Indirect taxes are imposed as wholesome and do not target the individual characteristics of the tax payer. The following are some common kinds of taxes;
Income tax
This is levied on corporations and on the income of individuals. On corporations, it will be levied on the net profits, gross profits, or other income of the corporation, and is usually affected by accounting principles. Some corporations however do not pay taxes. On personal income, income tax is charged on the gross income of the individual, as well as other incomes the individual may raise. It is paid at the conclusion of the year, or financial year for the case of corporations. Some individuals may overpay, and thus may be a refunded by the government, at the end of the year.
There are many other taxes imposed on various sources of income for different groups and corporations; social security contributions, capital gains tax, taxes on property, tax on payroll, inheritance tax, expatriations tax, transfer tax and wealth tax. There are also taxes on goods and services, and this include value added tax (VAT ), and sales tax.
Value added tax (VAT )
This is one form of taxes on goods and services. This is imposed on every level of production, through to distribution to the final consumer, where value is added to the product or service. An example may be that of a manufacturer who imports raw materials for his business, he will then pay the value added tax on his purchase price, and give that amount to the government. He will then convert the raw materials into some product, which he will sell to a distributor, or a consumer of his product, which may be another manufacturer. This, he will sell at a higher price, and collect the VAT on that sale. He will, however, remit to the government, an amount that is only the excess of his cost price, thus, only the amount related to the value added, before selling his product. This process will continue upto the final retail consumer, who will be unable to recover his amount of VAT paid.
SALES TAX
Sales tax is a kind of tax that is paid by a consumer of goods, at the point of purchase of the goods, or service. Sales tax is usually put as a separate line item at the base of the receipt of purchase that one has made, and is determined by subjecting purchases to a certain percentage, authorized by the relevant tax authority, or the tax laws of the administering authority, to the total price of the taxable goods or services purchased by the consumer. The administering authority may also determine whether the sales tax is included in the price of the commodity or service, or is calculated separately after the commodity or service has been purchased. The sales tax will then be collected from the buyer, by the seller, who will then remit the amount to the relevant tax administration author...