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Related to taxation: principles of taxation


system used by governments to obtain money from people and organizations. The revenue collected is used by the government to support itself and to provide public services. Aside from being relatively permanent, taxation is compulsory and does not guarantee a direct relationship between the amount contributed by a citizen and the extent of governmental services provided to him. An enforced levy to meet an emergency (e.g., capital levycapital levy,
form of taxation by which the government takes part of the capital of any person or business, as distinguished from a tax on personal or business income. It is usually applied to all capital above a certain minimum and may be set aside for a specific purpose, such
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) is distinguished from taxation as not being part of a long-term system; fees for special services, such as postage, are not taxes. A government may secure its revenue without taxation, as from natural resources, manufactured products, or services. Taxes are sometimes resisted when those who must pay them consider them too onerous or unfair; such resistance was one of the causes of the American Revolution. Ease of collection is considered a merit in a tax, and ability to pay is one test of the amount that an individual should contribute. Such a progressive levy is the U.S. inheritance taxinheritance tax,
assessment made on the portion of an estate received by an individual; it differs from an estate tax, which is a tax levied on an entire estate before it is distributed to individuals.
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. A general property tax formerly met requirements in the United States satisfactorily (see land taxland tax,
impost levied upon real property. It is sometimes called a real estate tax, especially when assessed against both improved and unimproved land. Probably the earliest direct tax and formerly the chief source of government revenue, it was known in ancient China and Egypt.
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); but as property increasingly assumed forms that escaped taxation, the burden on farms, once the usual form of property, became more than they could carry. A tax on luxuries is free in part from such an objection, although a luxury to one person may be a necessity to another. A modern variation of the sales tax is the value-added taxvalue-added tax
(VAT), levy imposed on business at all levels of the manufacture and production of a good or service and based on the increase in price, or value, provided by each level.
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. Tarifftariff,
tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic industries
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 duties have occasioned great debates on protectionprotection,
practice of regulating imports and exports with the purpose of shielding domestic industries from foreign competition. To accomplish that end, certain imports may be excluded entirely, import quotas may be established, or bounties paid on certain exports.
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 and free tradefree trade,
in modern usage, trade or commerce carried on without such restrictions as import duties, export bounties, domestic production subsidies, trade quotas, or import licenses.
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. Increasing use has been made of the graduated income taxincome tax,
assessment levied upon individual or corporate incomes. Although personal incomes were occasionally taxed in medieval Italian cities, the income tax is essentially a modern form of taxation.
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. Excise taxes, as on tobacco and alcoholic beverages, encounter little resistance; when too high, however, they may encourage bootlegging. A single taxsingle tax,
any levy that serves as the government's only source of revenue. Generally, however, it is understood to mean a tax derived from economic rent and used as the sole source of public receipts.
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 on land is advocated by the followers of Henry GeorgeGeorge, Henry,
1839–97, American economist, founder of the single tax movement, b. Philadelphia. Of a poor family, his formal education was cut short at 14, and in 1857 he emigrated to California; there he worked at various occupations before turning to newspaper writing
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. Increases or decreases in taxes or changes in the types of taxes levied are often used to regulate a nation's economy. See tax exemptiontax exemption,
immunity from the requirement of paying taxes. Federal, state, and usually local law provide exemption from taxation for a wide variety of organizations, usually not-for-profit, such as churches, colleges, universities, health care providers, various charities,
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See Dick Netzer, Economics of the Property Tax (1966); J. F. Due, Government Finance (4th ed. 1968); C. S. Shoup, Public Finance (1969); H. M. Groves, Financing Government (7th ed. 1973); C. Webber and A. Wildavsky, A History of Taxation and Expenditure in the Western World (1987).


compulsory levies by central or local governments. Taxation takes many forms, e.g. on personal wealth and income, on corporate income or profits, on the purchases of goods and services, on imports and exports. A major general distinction
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