Taxes
are collected by government department. Taxation
will vary greatly between different countries, how they differ,
such as the distinction between direct taxes on income and indirect taxes on
expenditure.
The
direct taxes are taxes levied on
income and capital. It is paid directly by the tax payer to the
government. The burden of direct taxes is borne by the person or
company responsible for paying the taxes.
There
are different types of direct taxes.
1)
Personal income tax is
calculated on the gross income after deducting the tax allowances [Gross income
– Allowances = Taxable income].
2)
Corporation taxes are tax levied
on the profits of all companies after deducting allowances such as interests on
loans and depreciation of capital.
3)
Capital gains tax is the tax
levied on the increase in the value of certain assets between the time of their
purchase and the time of their sale. [There are exemptions for personal private
residence, private motor cars, and amount earned from gambling and capital
gains on government securities.]
4)
Inheritance tax is a tax applied
to all gifts of wealth above some given value [transfer of wealth made on
death]
Indirect taxes are taxes paid in the form of higher price indirectly
through some others (Sellers, distributors or manufacturers) to the government.
In this taxation incidence
is with the tax payer and its impact is passed on to
another in the form of higher prices (such as sales tax).
There
are different types of indirect taxes.
The
main indirect taxes consists of 1) excise duties on home produced
goods and services, ii) Customs duties
on goods imported from abroad, iii) value added tax and iv) protective or import duties. vi) Miscellaneous license
fees
In
this kind of tax, the taxpayer (manufacturers or distributors) may pass on the burden of tax to some
other person (consumers) as higher prices.
Customs duties are collected by the customs department on goods imported
from abroad and they are indirect taxes
Excise duties are derived from three sources a) tobacco, b) alcoholic drinks c) hydrocarbon oil, and d) betting and gaming (a proportional tax
for pool betting and license fee for casino gambling, and gambling
machines)
Value-Added Tax (VAT) is a tax on consumption levied whenever the value of
goods and services increases as they change hands in the course of
production, distribution, and final sale to the consumer. Value added means the
increase in the value of a product or service at each stage of its
manufacture, or distribution. (In UK car tax is a special tax levied on
motor cars in addition to VAT)
Protective duties are levied on imports of goods from other countries.
(The rate of duty applicable varies for different countries.)
Miscellaneous license fees are obtained from the issue of a
variety of licenses.
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