To tax (from the Latin taxo; "I estimate", which in turn is from tangō; "I touch") is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity The term legal person is a concept in philosophy of law topics wherein an entity is regarded by law to be like a person with such status being granted legal rights to protections and/or privileges under law. It is a term found in business-corporate law and animal rights law contexts, wherein corporations are regarded as highly productive human) by a state A state is a set of institutions that possess the authority to make the rules that govern the people in one or more societies, having internal and external sovereignty over a definite territory. In Max Weber's influential definition, it is that organization that has a "monopoly on the legitimate use of physical force within a given territory& or the functional equivalent of a state such that failure to pay is punishable by law.

Taxes are also imposed by many subnational entities Administrative divisions are divisions of a political division. In other words, they are designated portions of a country. They are also called subnational entities. They are each granted a certain degree of autonomy, and are required to manage themselves through their own local governments. Countries are divided up into these smaller units to. Taxes consist of direct tax In the general sense, a direct tax is one paid directly to the government by the persons on whom it is imposed (often accompanied by a tax return filed by the taxpayer). Examples include some income taxes, some corporate taxes, and transfer taxes such as estate (inheritance) tax and gift tax. In this sense, a direct tax is contrasted with an or indirect tax In the colloquial sense, an indirect tax (such as sales tax, value added tax , or goods and services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). The intermediary later files a tax return and forwards the tax proceeds to, and may be paid in money Money is any object that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment or as its labour equivalent (often but not always unpaid labour). A tax may be defined as a "pecuniary burden laid upon individuals or property owners to support the government […] a payment exacted by legislative authority."^[1] A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government […] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name."^[1]

The legal definition and the economic definition of taxes differ in that economists do not consider many transfers to governments to be taxes. For example, some transfers to the public sector are comparable to prices. Examples include tuition at public universities and fees for utilities provided by local governments. Governments also obtain resources by creating money (e.g., printing bills and minting coins), through voluntary gifts (e.g., contributions to public universities and museums),by imposing penalties (e.g., traffic fines), by borrowing, and by confiscating wealth. From the view of economists, a tax is a non-penal, yet compulsory transfer of resources from the private to the public sector levied on a basis of predetermined criteria and without reference to specific benefit received.

In modern taxation systems, taxes are levied in money, but in-kind Payment in kind refers to payment for goods or services with a medium other than legal tender and corvée Corvée is labor, often unpaid, that is required of people of lower social standing and imposed on them by their superiors . It differs from chattel slavery in that the worker is not owned outright – being free in various respects other than in the dispensation of his or her labour – and the work is usually intermittent; typically only a taxation are characteristic of traditional or pre-capitalist Capitalism is an economic system in which the means of production and distribution are privately owned and operated for a private profit; decisions regarding supply, demand, price, distribution, and investments are made by private actors in the market rather than by central planning; profit is distributed to owners who invest in businesses, and states and their functional equivalents. The method of taxation and the government expenditure of taxes raised is often highly debated in politics Politics , is a process by which groups of people make collective decisions. The term is generally applied to behavior within civil governments, but politics has been observed in other group interactions, including corporate, academic, and religious institutions. It consists of "social relations involving authority or power" and refers and economics Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)". Current economic. Tax collection is performed by a government agency such as Canada Revenue Agency The Canada Revenue Agency (formerly Revenue Canada under the Federal Identity Program) is a federal agency that administers tax laws for the Government of Canada and for most provinces and territories, international trade legislation, and various social and economic benefit and incentive programs delivered through the tax system. It also oversees, the Internal Revenue Service The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue. The IRS is responsible for collecting taxes and the interpretation and enforcement of the IRC (Internal Revenue Code) (IRS) in the United States ^ b. English is the de facto language of American government and the sole language spoken at home by 80% of Americans age five and older. Spanish is the second most commonly spoken language, or Her Majesty's Revenue and Customs Her Majesty's Revenue and Customs (Welsh: Cyllid a Thollau Ei Mawrhydi) is a non-ministerial department of the British Government primarily responsible for the collection of taxes and the payment of some forms of state support (HMRC) in the UK The United Kingdom of Great Britain and Northern Ireland[note 7] is a sovereign state located off the northwestern coast of continental Europe. It is an island country, spanning an archipelago including Great Britain, the northeastern part of the island of Ireland, and many small islands. Northern Ireland is the only part of the UK with a land. When taxes are not fully paid, civil penalties (such as fines The most usual use of the term, fine, relates to a financial punishment for the commission of minor crimes or as the settlement of a claim. A synonym, typically used in civil law actions, is mulct or forfeiture Asset forfeiture is a term used to describe the confiscation of assets, by the state, which are either the proceeds of crime or (b) the instrumentalities of crime, and more recently, terrorism. Instrumentalities of crime are property that was used to facilitate crime, for example cars used to transport illegal narcotics. The terminology used in) or criminal penalties (such as incarceration Incarceration is the detention of a person in jail —typically as punishment for a crime. People are most commonly incarcerated upon suspicion or conviction of committing a crime, and different jurisdictions have differing laws governing the function of incarceration within an larger system of justice. Incarceration serves two essential purposes)^[2] may be imposed on the non-paying entity or individual.

Purposes and effects

Funds provided by taxation have been used by states and their functional equivalents throughout history to carry out many functions. Some of these include expenditures on war, the enforcement of law Law is a system of rules, usually enforced through a set of institutions. Laws can shape or reflect politics, economics and society in numerous ways and serves as a primary social mediator of relations between people and public order In criminology public order crime is defined by Siegel as "...crime which involves acts that interfere with the operations of society and the ability of people to function efficiently", i.e. it is behaviour that has been labelled criminal because it is contrary to shared norms, social values, and customs. Robertson (1989:123) maintains, protection of property Property is any physical or intangible entity that is owned by a person or jointly by a group of persons. Depending on the nature of the property, an owner of property has the right to consume, sell, rent, mortgage, transfer, exchange or destroy their property, and/or to exclude others from doing these things. Important widely recognized types of, economic infrastructure (roads A road is an identifiable thoroughfare, route, way or path between two places which may or may not be available for use by the public; public roads, especially major roads connecting significant destinations are termed highways. Modern roads are normally smoothed, paved, or otherwise prepared to allow easy travel although historically many roads, legal tender Legal tender or forced tender is an offered payment that, by law, cannot be refused in settlement of a debt, and have the debt remain in force. Currency is the most common form of legal tender, enforcement of contracts, etc.), public works "Public works" is a concept in economics and politics. The term public infrastructure refers only to the infrastructural capital involved in these activities, social engineering Social engineering is a discipline in political science that refers to efforts to influence popular attitudes and social behaviors on a large scale, whether by governments or private groups. In the political arena, the counterpart of social engineering is political engineering, and the operation of government itself. Governments also use taxes to fund welfare Welfare or welfare work consists of actions or procedures — especially on the part of governments and institutions — striving to promote the basic well-being of individuals in need. These efforts usually strive to improve the financial situation of people in need but may also strive to improve their employment chances and many other aspects of and public services Public services is a term usually used to mean services provided by government to its citizens, either directly or by financing private provision of services. The term is associated with a social consensus (usually expressed through democratic elections) that certain services should be available to all, regardless of income. Even where public. These services can include education systems Education in the largest sense is any act or experience that has a formative effect on the mind, character or physical ability of an individual. In its technical sense education is the process by which society deliberately transmits its accumulated knowledge, skills and values from one generation to another, health care systems Health care systems are designed to meet the health care needs of target populations. There are a wide variety of health care systems around the world. In some countries, the health care system planning is distributed among market participants, whereas in others planning is made more centrally among governments, trade unions, charities, religious,, pensions In general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum for the elderly, unemployment benefits Unemployment benefits are payments made by the state or other authorized bodies to unemployed people. Benefits may be based on a compulsory para-governmental insurance system. Depending on the jurisdiction and the status of the person, those sums may be meager, covering only basic needs , or may compensate the lost pay somewhat proportionally to, and public transportation Public transport is a shared passenger transportation service which are available for use by the general public, as distinct from modes such as Taxicab, car pooling which are not shared by strangers without private arrangement. Energy An electric utility is a company that engages in the generation, transmission, and distribution of electricity for sale generally in a regulated market. The electrical utility industry is a major provider of energy in most countries. It is indispensable to factories, commercial establishments, homes, and even most recreational facilities. Lack of, water Categories: Water supply | Water management | Water resources management | Water development and sustainability and waste management Waste management is the collection, transport, processing, recycling or disposal, and monitoring of waste materials. The term usually relates to materials produced by human activity, and is generally undertaken to reduce their effect on health, the environment or aesthetics. Waste management is also carried out to recover resources from it. Waste systems are also common public utilities A public utility is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and regulation ranging from local community-based groups to state-wide government monopolies. Common arguments in favor of regulation include. Colonial and modernizing states have also used cash taxes to draw or force reluctant subsistence producers into cash economies.

Governments use different kinds of taxes and vary the tax rates. This is done to distribute the tax burden among individuals or classes of the population involved in taxable activities, such as business A business is a legally recognized organization designed to provide goods or services, or both, to consumers, businesses and governmental entities. Businesses are predominant in capitalist economies. Most businesses are privately owned. A business is typically formed to earn profit that will increase the wealth of its owners and grow the business, or to redistribute resources between individuals or classes in the population. Historically, the nobility Nobility is a state-privileged status which is generally hereditary. The privileges associated with nobility may constitute substantial advantages over or relative to non-nobles, or may be largely honorary , but are maintained, or at least officially acknowledged, by law or government. Titles of nobility have often been associated with present or were supported by taxes on the poor; modern social security Social security is primarily a social insurance program providing social protection, or protection against socially recognized conditions, including poverty, old age, disability, unemployment and others. Social security may refer to: systems are intended to support the poor, the disabled, or the retired by taxes on those who are still working. In addition, taxes are applied to fund foreign aid and military ventures, to influence the macroeconomic Macroeconomics (from Greek prefix "macr-" meaning "large" + "economics") is a branch of economics that deals with the performance, structure, behavior and decision-making of the entire economy, be that a national, regional, or the global economy. With microeconomics, macroeconomics is one of the two most general performance of the economy (the government's strategy for doing this is called its fiscal policy Fiscal policy can be contrasted with the other main type of macroeconomic policy, monetary policy, which attempts to stabilize the economy by controlling interest rates and the supply of money. The two main instruments of fiscal policy are government expenditure and taxation. Changes in the level and composition of taxation and government spending - see also tax exemption Various tax systems grant a tax exemption to certain organizations, persons, income, property or other items taxable under the system. Such status may provide a potential taxpayer complete relief from tax, tax at a reduced rate, or tax on only a portion of the items subject to tax. Examples include exemption of charitable organizations from), or to modify patterns of consumption or employment within an economy, by making some classes of transaction more or less attractive.

A nation's tax system is often a reflection of its communal values or/and the values of those in power. To create a system of taxation, a nation must make choices regarding the distribution of the tax burden—who will pay taxes and how much they will pay—and how the taxes collected will be spent. In democratic nations where the public elects those in charge of establishing the tax system, these choices reflect the type of community that the public and/or government wishes to create. In countries where the public does not have a significant amount of influence over the system of taxation, that system may be more of a reflection on the values of those in power.

The resource collected from the public through taxation is always greater than the amount which can be used by the government. The difference is called compliance cost, and includes for example the labour cost and other expenses incurred in complying with tax laws and rules. The collection of a tax in order to spend it on a specified purpose, for example collecting a tax on alcohol to pay directly for alcoholism rehabilitation centres, is called hypothecation Hypothecation is the dedication of the revenue of a specific tax for a specific expenditure purpose. It is as a contraction of 'hypothetical dedication', as in a 'dedicated tax' to be collected for a specific purpose. . It is otherwise known as ring-fencing. This practice is often disliked by finance ministers A minister of finance has many different jobs in a government. He or she helps form the government budget, stimulate the economy, and control finances. Finance ministers are often found in state or provincial governments if that country has a form of federalism, since it reduces their freedom of action. Some economic theorists consider the concept to be intellectually dishonest since (in reality) money is fungible Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. Examples of highly fungible commodities are crude oil, wheat, orange juice, precious metals, and currencies. Furthermore, it often happens that taxes or excises initially levied to fund some specific government programs are then later diverted to the government general fund. In some cases, such taxes are collected in fundamentally inefficient ways, for example highway tolls.

Some economists, especially neo-classical economists Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often as mediated through a hypothesized maximization of income-constrained utility by individuals and of cost-constrained profits of firms employing available, argue that all taxation creates market distortion A market distortion is a specific type of market failure brought about by deliberate government regulation which prevents economic agents from freely establishing a clearing price and results in economic inefficiency. They have therefore sought to identify the kind of tax system that would minimize this distortion. Also, one of every government's most fundamental duties is to administer possession and use of land in the geographic area over which it is sovereign, and it is considered economically efficient for government to recover for public purposes the additional value it creates by providing this unique service.

Since governments also resolve commercial disputes, especially in countries with common law Common law is law developed by judges through decisions of courts and similar tribunals , rather than through legislative statutes or executive branch action. A "common law system" is a legal system that gives great precedential weight to common law, on the principle that it is unfair to treat similar facts differently on different, similar arguments are sometimes used to justify a sales tax A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale. A portion of the sale may be exempt from the calculation of tax, because sales tax laws usually contain a list of exemptions. Laws governing the tax may or value added tax. Others (e.g. libertarians) argue that most or all forms of taxes are immoral due to their involuntary (and therefore eventually coercive/violent) nature. The most extreme anti-tax view is anarcho-capitalism, in which the provision of all social services should be voluntarily bought by the person(s) using them.

The Four "R"s

Taxation has four main purposes or effects: Revenue, Redistribution, Repricing, and Representation.^{[3][not in citation given]}

The main purpose is revenue: taxes raise money to spend on armies, roads, schools and hospitals, and on more indirect government functions like market regulation or legal systems. This is the most widely known function.^{[3][not in citation given]}

A second is redistribution. Normally, this means transferring wealth from the richer sections of society to poorer sections.

A third purpose of taxation is repricing. Taxes are levied to address externalities: tobacco is taxed, for example, to discourage smoking, and a carbon tax discourages use of carbon-based fuels.

A fourth, consequential effect of taxation in its historical setting has been representation.^{[3][not in citation given]} The American revolutionary slogan "no taxation without representation" implied this: rulers tax citizens, and citizens demand accountability from their rulers as the other part of this bargain. Several studies^{[citation needed]} have shown that direct taxation (such as income taxes) generates the greatest degree of accountability and better governance, while indirect taxation tends to have smaller effects.^[4][5]

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