We explain what taxes are, the elements that compose them and the types that exist. In addition, what is its function and various examples.
What are taxes?
Taxes, charges or taxes are a payment obligation that the State imposes on its citizens , without there being a direct consideration of goods or services. It has in principle the purpose of financing public sector activities that are of common benefit.
All citizens of a State must, in one way or another, comply with the payment of certain taxes. For this , the principle of contributory capacity is used , which establishes those who have more resources, must provide a greater amount of resources than those less favored, in order to achieve a society with more social and economic equity .
Those who fail to pay taxes are sanctioned by the State itself, either through fines and new impositions or, eventually, jail sentences, as established by the tax law of that nation . The specific tax regulations of a nation are known as the tax system or tax system.
What are taxes for?
Taxes, as we have said, in principle serve to financially support the State . Together with public companies and other types of income , collection is the quintessential mechanism for financing the public, so that, among all citizens of a country, they support activities that are of common benefit and that are not intended for profit.
However, taxes can also serve other purposes, such as discouraging certain dynamics of consumption , in what is usually considered as internal protection mechanisms (or protectionist measures).
In those cases, the State imposes taxes on certain imported products to increase their cost and thus defend local producers, who otherwise could not compete commercially. Taxes can also be assigned to make certain types of products considered harmful to health or whose consumption seeks to be discouraged, such as cigarettes or alcohol, more expensive.
Finally, income taxes and sudden gains are intended to allocate to the State a portion of the money earned by the richest in society or by those who win bets or the lottery, in order to fight against the concentration of capital in a single social class or a small set of people .
Elements of the tax
Every tax consists of the following elements:
- Taxable event , which is the reason for the tax, that is, the reason we must pay.
- Passive subject , which are all persons (natural or legal ) who must face the obligation to pay taxes.
- Taxable base , or the amount on which taxes are payable.
- Type of assessment , the proportion or percentage that is calculated, depending on the case, using formulas that govern how and how much to pay.
- Tax fee , finally, is the amount to be paid for tax purposes.
Types of taxes
There are different types of taxes and different ways of classifying them, for example:
Depending on your type of assessment:
- Proportional or flat taxes . Those who always impose a fixed rate or percentage, regardless of the context of the tax.
- Progressive taxes . Those who increase the percentage of tax calculation as the profit or income is greater.
- Regressive taxes . Those that decrease the percentage of tax calculation as the profit or income is greater.
According to your taxable event :
- Direct taxes . Those who tax sources of wealth, property or income, such as income taxes, or the possession of certain assets.
- Indirect taxes . Those who tax consumption, without affecting the income of a taxpayer’s wealth, but adding to the price of a good or service , such as the value added tax, or the tobacco and alcohol tax.
According to your considerations regarding the taxpayer :
- Tax objectives . Those who do not take into account the conditions of the taxpayer when calculating their tax rate.
- Subjective taxes . Those that allow the taxpayer to demonstrate mitigating, obligations of another type and justify a decrease or a different calculation in their tax quota.
According to its temporality :
- Instant taxes . Those that are charged at the time of conducting a commercial operation, usually because they are already incorporated into the final price of the product or service.
- Tax newspapers . Those that must be paid within certain limits or lapses established by the State and announced in advance, so that the taxpayer can receive rebates for timely payment or surcharges for timely payment.
Some common examples of taxes are:
- Value Added Tax (VAT) . Also known as Value Added Tax or Reduced Value Tax, it is an indirect and regressive tax, which is usually imposed on goods and services that are not essential or are part of the basket of protected products, if any.
- Tax assets . Sometimes called wealth tax or fortune tax, it is an individual tax calculated on the personal assets of natural or natural persons, estimating a total value of absolutely all the assets they own.
- Income tax . This tax is perhaps the most important of any tax system, and is imposed on the profits and profits of natural and legal persons, whether in a flat, progressive or regressive way. Generally it has a minimum tax that prevents people who least earn money in society from being charged.
- Inheritance and donation tax . As the name implies, this tax taxes assets acquired through inheritances, gifts, bequests or donations, provided they meet certain legal requirements, such as a free reception or mortis causa (that is, after the death of another).