A tax is any monetary charge or tax levied on an individual by a government body so as to finance various public needs and expenditures and also for the payment of tax-related taxes. A person may be charged a tax for one, multiple or even a combination of transactions. evasion of or refusal to pay tax, and also prosecution of a person under the law, is generally punishable by law.
Production-based taxes are those based on production. A manufacturer, for example, levies a production tax when products sold to customers are purchased from their factory and it is also possible to evade this tax by including the price of purchases in the manufacturing process. Consumption-based taxes on the other hand are taxes based on the consumption made by consumers in a community. Examples of consumption-based taxes are the gas tax, the tobacco tax and the food and drink tax.
The major kinds of direct taxes are the following: Property tax, sales tax, Excise tax, Valuation tax, Licensing fee, Net sale tax, Ad valorem tax, Payment of tax, Self-Employment tax, Franchise tax, Estate tax and Sales tax. Pertinent to the classification of indirect taxes, direct taxes on goods are included in the general category of consumption taxes while taxes on the transfer of property are classified as either direct or indirect taxes. Consumption taxes include food and drink taxes, sales taxes, excises and local taxes and direct taxes on removers such as gasoline, tobacco, alcohol and fishing tackle. Indirect taxes on the transfer of property include the property value tax, the estate tax, the income and casino surcharge.
There are two basic types of indirect taxes: regressive and proportional. A regressive tax takes the form of income tax, which is a regressive taxation system which falls mainly on high incomes. A proportional tax system is based on the principle that people should have a fair share in the profits of big businesses.
Regressive sales taxes are based on the principle of supply and demand. According to this principle, when the demand for a product increases, then the price of that product also goes up. Thus, it is expected that the sales tax rate will decrease as supply decreases and vice versa.
Percentage based corporate income taxes are based on the principle of elasticity of prices. It is considered that when a firm expands its business operations, the prices of its products and services also tend to increase. On the other hand, when an enterprise closes down operations, the prices of its products and services tend to reduce. Thus, it is expected that corporate income tax will fall proportionately with industrial production. Moreover, a corporation is only taxed once at the establishment whereas a sole proprietor is liable for paying corporate income taxes on the basis of each transaction.