Government Taxation Essay
Nearly in the past thirty years, the numeral nationalized industries is firmly declining in many areas of the world, people with left-wing ideas still believe that the government has an inherent role in the economic infrastructure (transport, communications etc) and assuring the supplying of education, health care, social safety, working conditions, and so on.
Besides, government may help in other ways. One famous American economist J.K. Galbraith thinks that first of all, in no country there is good housing in the market system. This is very important case that must be a public responsibility, because badly-housed or homeless people are not harmonizing with the good society.
Health care is a public responsibility as well. It should be attention to science, different types of research.
Another outstanding economist, R.Friedman, is sure that the role of government has limited human liberty. As he thinks, the restrictions imposed on our economic liberty, threaten to finish two centuries of economic advance.
Key words: direct taxation, indirect taxation, tax avoidance, tax evasion, loopholes, tax shelter, tax loss, tax haven, ”duties”, “black” economy.
GOVERNMENT TAXATION
A tax is a paying of money legally required by a government authority to meet public costs. It is obligatory: without taxation it is impossible to pay to workers in government agencies that care about things which we cannot make for us directly, soldiers and policemen who protect us or ministers and members of parliament who rule the country for us. Although everyone knows that taxation is compulsory, various people have various opinions about how taxation must be organized. There are two major methods of taxation:
1) everyone must рау а definite sum of money to the government annually;
2) there is а tax on what people buy and sell.
In various countries there is а direct tax that is called income tax. According to it, the poorest people do not рау anything, and the percentage of tax increases bigger as the taxpayer’s income increases. But in places with direct taxation there is always an indirect taxation, as well. Different things imported into the country should pay taxes or “duties”. In some places, there is а tax on things that are sold in the shops also. If the most needful things are taxed, great amount of money is obtained, but the poorest people endure most. If useless things are taxed less money is collected, but the taxation is fairer, because the richest people pay it. Perhaps, this last type of indirect taxation together with a direct one on income which is
GOVERNMENT TAXATION
low for the poorest and high for the richest is the best strategy. The fundamental function of taxation is, undoubtedly, to elevate revenue to finance government consumption, but taxation may have other aims too. For instance, indirect duties may be planned to discourage people from harmful habits such as smoking and drinking. Governments may promote capital investment by allowing different ways of boomed derogation accounting that permit companies to allot more of the investments cost from their benefits, and as a result, to abate their tax bills. There is always а discussion about fairness of taxation systems. For instance, business benefits are taxed twice: organizations pay tax on their benefits (income tax in the United States), and stockholders pay income tax on dividends. Income taxes mostly are progressive, and this kind of taxation is a way in which governments can redistribute prosperity. The difficulty with progressive taxes lying in the marginal rate – the tax payment of people on any additional income – is always high which an obstacle is in general. From the other side, majority of taxes to sales are a little bit regressive because poor people should spend the big proportion of their income on use than the rich ones. In many areas taxes are fair and do not harmful for the people’s interests. This relate to places, where the consumptions of the government are not high and eventually it does not need to obtain high taxes or the government has other ways of income, such as beneficial business exertions. Or the
GOVERNMENT TAXATION
state police is to give more liberty to business to improve the economic situation. But some governments have scanty money to finance its consumptions and they grow taxation rates as an alternative of adopting money. They may also limit needless business activities. This decreases motive to work, because benefits become very short and a lot of businessmen try to hide incomes. There are many of ways to do it: tax avoidance (curtailing the sum of tax to a minimum that consider being legal) or tax evasion (writing wrong unreal declaration). The high taxation leads to the situations when people are trying to hide, and there is а sturdy “black” or “underground” economy almost everywhere. Many people have undeclared occupations where they do not have to pay any taxes at all. To abate income tax liability, some entrepreneurs give workers many perquisites instead of taxable money. Such as these, legal ways of avoiding taxation are recognized as loopholes. Pension plans and different investments, by which people can defer taxes, are called tax shelters. Grants to charities may be deducted from the income on which tax is collected. Companies operate many methods of avoiding tax on benefits. They can put forward capital consumption (on new plants, mechanisms etc) so that in the end of the year all the benefits have been used up; this is recognized as doing а tax loss. International companies often arrange their main offices in such countries as Monaco, the Cayman Islands, or the Bahamas, where taxes are low; such places
GOVERNMENT TAXATION
are called tax havens. Criminal arrangements tend to transport money in very difficult transactions in order to conceal its nature from tax auditors and the роliсе; this is called laundering money.
