Taxes are mandatory financial charges or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labor equivalent. The first recorded history of taxation goes back to the Ancient Egyptians around 3000-2800 BC. Most countries have a tax system in place to pay for public, common, or agreed national needs and government functions: some levy a flat percentage rate of taxation on personal annual income, but most scale taxes based on annual income amounts.
Tax revenue is used by governments to fund public services such as healthcare, education, and welfare, infrastructure projects like roads, bridges, and public transportation, and to provide security through police and military services. In economic terms, taxation transfers wealth from households or businesses to the government. This has effects that can both increase and reduce economic growth and economic welfare. Consequently, taxation is a highly debated topic in terms of economics and is central in politics and public economics. For instance, some view tax policy as a tool for social justice, where progressive taxing imposes higher rates on richer individuals.
Understanding the various types of taxes can be complex. Income_tax, charged on individual earnings, is the most widely known form of taxation. Then there is property_tax, which is charged on the value of property owned by individuals or corporations. Sales taxes, which are levied on certain goods and services, value_added_tax (VAT) or goods and services tax (GST) are a type of consumption tax added at each point of sale. Excise taxes, often included in the price of products such as alcohol and tobacco, are not directly visible to consumers. Many countries also enforce taxes like estate taxes or inheritance taxes, tariffs, and corporate taxes.
Internationally, tax laws vary significantly, influenced by history, culture, and economic structure of the country. For example, the Scandinavian countries are known for having one of the highest tax rates in the world, which fund their extensive welfare states, often seen as providing high-quality services in public transport, health care, and education. In contrast, countries like Bahrain and the Cayman_Islands have no general income tax, making them attractive as tax havens. There's also ongoing international debate and reform efforts regarding digital_taxation, as governments seek to tax multinational tech giants that often earn significant income in countries where they pay minimal taxes. This highlights the continuous evolution and complexity of taxation laws and practices globally.