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Tax
FromWikipedia,thefreeencyclopedia

Atax(fromtheLatintaxo"rate")isafinancialchargeorotherlevyimposeduponataxpayer(an
individualorlegalentity)byastateorthefunctionalequivalentofastatetofundvariouspublic
expenditures.[1]Afailuretopay,orevasionoforresistancetotaxation,isusuallypunishablebylaw.
Taxesarealsoimposedbymanyadministrativedivisions.Taxesconsistofdirectorindirecttaxesand
maybepaidinmoneyorasitslabourequivalent.Fewcountriesimposenotaxationatall,suchasthe
UnitedArabEmirates.[2]

Contents
1Overview
2Purposesandeffects
3Kindsoftaxes
3.1Taxesonincome
3.2Socialsecuritycontributions
3.3Taxesonpayrollorworkforce
3.4Taxesonproperty
3.5Taxesongoodsandservices
3.6Tariff
3.7Othertaxes
3.8Descriptivelabelsgivensometaxes
3.9Feesandeffectivetaxes
4History
4.1Taxationlevels
4.2Formsoftaxation
5Economiceffects
5.1Taxincidence
5.2Increasedeconomicwelfare
5.3Reducedeconomicwelfare
6Taxationindevelopingcountries
6.1Keyfacts
6.2Summary
7Viewsontaxation
7.1Supportfortaxation
7.2Oppositiontotaxation
7.3Socialistview
7.4Taxchoice
7.5GeoistView
8Theoriesontaxation
8.1Laffercurve
8.2Optimaltax
8.3Taxrates
9Seealso
9.1Bycountryorregion
10Notes
11Furtherreading
12Externallinks
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Overview
Thelegaldefinitionandtheeconomicdefinitionoftaxesdifferin
thateconomistsdonotregardmanytransferstogovernmentsas
taxes.Forexample,sometransferstothepublicsectorare
comparabletoprices.Examplesincludetuitionatpublic
universitiesandfeesforutilitiesprovidedbylocalgovernments.
Governmentsalsoobtainresourcesby"creating"moneyand
coins(forexample,byprintingbillsandbymintingcoins),
throughvoluntarygifts(forexample,contributionstopublic
universitiesandmuseums),byimposingpenalties(suchastraffic
PieterBruegheltheYounger,Thetax
fines),byborrowing,andbyconfiscatingwealth.Fromtheview
collector'soffice,1640
ofeconomists,ataxisanonpenal,yetcompulsorytransferof
resourcesfromtheprivatetothepublicsectorleviedonabasis
ofpredeterminedcriteriaandwithoutreferencetospecificbenefitreceived.
Inmoderntaxationsystems,governmentslevytaxesinmoneybutinkindandcorvetaxationare
characteristicoftraditionalorprecapitaliststatesandtheirfunctionalequivalents.Themethodof
taxationandthegovernmentexpenditureoftaxesraisedisoftenhighlydebatedinpoliticsand
economics.TaxcollectionisperformedbyagovernmentagencysuchastheCanadaRevenueAgency,
theInternalRevenueService(IRS)intheUnitedStates,orHerMajesty'sRevenueandCustoms
(HMRC)intheUnitedKingdom.Whentaxesarenotfullypaid,thestatemayimposecivilpenalties
(suchasfinesorforfeiture)orcriminalpenalties(suchasincarceration)onthenonpayingentityor
individual.[3]

Purposesandeffects
Moneyprovidedbytaxationhasbeenusedbystatesandtheirfunctionalequivalentsthroughouthistory
tocarryoutmanyfunctions.Someoftheseincludeexpendituresonwar,theenforcementoflawand
publicorder,protectionofproperty,economicinfrastructure(roads,legaltender,enforcementof
contracts,etc.),publicworks,socialengineering,subsidies,andtheoperationofgovernmentitself.A
portionoftaxesalsogotopayoffthestate'sdebtandtheinterestthisdebtaccumulates.Governments
alsousetaxestofundwelfareandpublicservices.Theseservicescanincludeeducationsystems,health
caresystems,pensionsfortheelderly,unemploymentbenefits,andpublictransportation.Energy,water
andwastemanagementsystemsarealsocommonpublicutilities.Colonialandmodernizingstateshave
alsousedcashtaxestodraworforcereluctantsubsistenceproducersintocasheconomies.
Mosteconomists,especiallyneoclassicaleconomists,arguethatalltaxationcreatesmarketdistortion
andresultsineconomicinefficiency.Theyhavethereforesoughttoidentifythekindoftaxsystemthat
wouldminimizethisdistortion.[4]RecentscholarshipsuggeststhatintheUnitedStates,thefederal
governmenteffectivelytaxesinvestmentsinhighereducationmoreheavilythanitsubsidizeshigher
education,therebycontributingtoashortageofskilledworkersandunusuallyhighdifferencesinpretax
earningsbetweenhighlyeducatedandlesseducatedworkers.[4]
Governmentsusedifferentkindsoftaxesandvarythetaxrates.Thisisdonetodistributethetaxburden
amongindividualsorclassesofthepopulationinvolvedintaxableactivities,suchasbusiness,orto
redistributeresourcesbetweenindividualsorclassesinthepopulation.Historically,thenobilitywere
supportedbytaxesonthepoormodernsocialsecuritysystemsareintendedtosupportthepoor,the
disabled,ortheretiredbytaxesonthosewhoarestillworking.Inaddition,taxesareappliedtofund
foreignaidandmilitaryventures,toinfluencethemacroeconomicperformanceoftheeconomy(the
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government'sstrategyfordoingthisiscalleditsfiscalpolicyseealsotaxexemption),ortomodify
patternsofconsumptionoremploymentwithinaneconomy,bymakingsomeclassesoftransaction
moreorlessattractive.
Anation'staxsystemisoftenareflectionofitscommunalvaluesandthevaluesofthoseincurrent
politicalpower.Tocreateasystemoftaxation,anationmustmakechoicesregardingthedistributionof
thetaxburdenwhowillpaytaxesandhowmuchtheywillpayandhowthetaxescollectedwillbe
spent.Indemocraticnationswherethepublicelectsthoseinchargeofestablishingthetaxsystem,these
choicesreflectthetypeofcommunitythatthepublicwishestocreate.Incountrieswherethepublicdoes
nothaveasignificantamountofinfluenceoverthesystemoftaxation,thatsystemmaybemoreofa
reflectiononthevaluesofthoseinpower.
Alllargebusinessesincuradministrativecostsintheprocessofdeliveringrevenuecollectedfrom
customerstothesuppliersofthegoodsorservicesbeingpurchased.Taxationisnodifferentthe
resourcecollectedfromthepublicthroughtaxationisalwaysgreaterthantheamountwhichcanbeused
bythegovernment.Thedifferenceiscalledthecompliancecostandincludesforexamplethelabour
costandotherexpensesincurredincomplyingwithtaxlawsandrules.Thecollectionofataxinorderto
spenditonaspecifiedpurpose,forexamplecollectingataxonalcoholtopaydirectlyforalcoholism
rehabilitationcentres,iscalledhypothecation.Thispracticeisoftendislikedbyfinanceministers,since
itreducestheirfreedomofaction.Someeconomictheoristsconsidertheconcepttobeintellectually
dishonestsince,inreality,moneyisfungible.Furthermore,itoftenhappensthattaxesorexcisesinitially
leviedtofundsomespecificgovernmentprogramsarethenlaterdivertedtothegovernmentgeneral
fund.Insomecases,suchtaxesarecollectedinfundamentallyinefficientways,forexamplehighway
tolls.
Sincegovernmentsalsoresolvecommercialdisputes,especiallyincountrieswithcommonlaw,similar
argumentsaresometimesusedtojustifyasalestaxorvalueaddedtax.Others(e.g.,libertarians)argue
thatmostorallformsoftaxesareimmoralduetotheirinvoluntary(andthereforeeventually
coercive/violent)nature.Themostextremeantitaxviewisanarchocapitalism,inwhichtheprovision
ofallsocialservicesshouldbevoluntarilyboughtbytheperson(s)usingthem.

Kindsoftaxes
TheOrganisationforEconomicCooperationandDevelopment(OECD)publishesananalysisoftax
systemsofmembercountries.Aspartofsuchanalysis,OECDdevelopedadefinitionandsystemof
classificationofinternaltaxes,[5]generallyfollowedbelow.Inaddition,manycountriesimposetaxes
(tariffs)ontheimportofgoods.

Taxesonincome
Incometax
Manyjurisdictionstaxtheincomeofindividualsandbusinessentities,includingcorporations.Generally
thetaxisimposedonnetprofitsfrombusiness,netgains,andotherincome.Computationofincome
subjecttotaxmaybedeterminedunderaccountingprinciplesusedinthejurisdiction,whichmaybe
modifiedorreplacedbytaxlawprinciplesinthejurisdiction.Theincidenceoftaxationvariesby
system,andsomesystemsmaybeviewedasprogressiveorregressive.Ratesoftaxmayvaryorbe
constant(flat)byincomelevel.Manysystemsallowindividualscertainpersonalallowancesandother
nonbusinessreductionstotaxableincome,althoughbusinessdeductionstendtobefavoredoverpersonal
deductions.[4]
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Personalincometaxisoftencollectedonapayasyouearnbasis,withsmallcorrectionsmadesoon
aftertheendofthetaxyear.Thesecorrectionstakeoneoftwoforms:paymentstothegovernment,for
taxpayerswhohavenotpaidenoughduringthetaxyearandtaxrefundsfromthegovernmentforthose
whohaveoverpaid.Incometaxsystemswilloftenhavedeductionsavailablethatlessenthetotaltax
liabilitybyreducingtotaltaxableincome.Theymayallowlossesfromonetypeofincometobecounted
againstanother.Forexample,alossonthestockmarketmaybedeductedagainsttaxespaidonwages.
Othertaxsystemsmayisolatetheloss,suchthatbusinesslossescanonlybedeductedagainstbusiness
taxbycarryingforwardthelosstolatertaxyears.
Negativeincometax
Ineconomics,anegativeincometax(abbreviatedNIT)isaprogressiveincometaxsystemwherepeople
earningbelowacertainamountreceivesupplementalpayfromthegovernmentinsteadofpayingtaxes
tothegovernment.
Capitalgainstax
Mostjurisdictionsimposinganincometaxtreatcapitalgainsaspartofincomesubjecttotax.Capital
gainisgenerallyagainonsaleofcapitalassetsthatis,thoseassetsnotheldforsaleintheordinary
courseofbusiness.Capitalassetsincludepersonalassetsinmanyjurisdictions.Somejurisdictions
providepreferentialratesoftaxoronlypartialtaxationforcapitalgains.Somejurisdictionsimpose
differentratesorlevelsofcapitalgainstaxationbasedonthelengthoftimetheassetwasheld.Because
taxratesareoftenmuchlowerforcapitalgainsthanforordinaryincome,thereiswidespread
controversyanddisputeabouttheproperdefinitionofcapital.Sometaxscholarshavearguedthat
differencesinthewaysdifferentkindsofcapitalandinvestmentaretaxedcontributetoeconomic
distortions.[4]
Corporatetax
Corporatetaxreferstoincome,capital,networth,orothertaxesimposedoncorporations.Ratesoftax
andthetaxablebaseforcorporationsmaydifferfromthoseforindividualsorothertaxablepersons.

Socialsecuritycontributions
Manycountriesprovidepubliclyfundedretirementorhealthcaresystems.[6]Inconnectionwiththese
systems,thecountrytypicallyrequiresemployersand/oremployeestomakecompulsorypayments.[7]
Thesepaymentsareoftencomputedbyreferencetowagesorearningsfromselfemployment.Taxrates
aregenerallyfixed,butadifferentratemaybeimposedonemployersthanonemployees.[8]Some
systemsprovideanupperlimitonearningssubjecttothetax.Afewsystemsprovidethatthetaxis
payableonlyonwagesaboveaparticularamount.Suchupperorlowerlimitsmayapplyforretirement
butnothealthcarecomponentsofthetax.Somehavearguedthatsuchtaxesonwagesareaformof
"forcedsavings"andnotreallyatax,whileotherspointtoredistributionthroughsuchsystemsbetween
generations(fromnewercohortstooldercohorts)andacrossincomelevels(fromhigherincomelevels
tolowerincomelevels)whichsuggestthatsuchprogramsarereallytaxandspendingprograms.[4]Some
taxscholarsarguethatsupportingsocialsecurityprogramsexclusivelythroughtaxesonwages,rather
thanthroughbroadertaxesthatincludecapital,createsdistortionsandunderinvestmentinhuman
capital,sincethereturnstosuchinvestmentswillbetaxesaswages.[4]

Taxesonpayrollorworkforce
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Unemploymentandsimilartaxesareoftenimposedonemployersbasedontotalpayroll.Thesetaxes
maybeimposedinboththecountryandsubcountrylevels.[9]

Taxesonproperty
Recurrentpropertytaxesmaybeimposedonimmovableproperty(realproperty)andsomeclassesof
movableproperty.Inaddition,recurrenttaxesmaybeimposedonnetwealthofindividualsor
corporations.[10]Manyjurisdictionsimposeestatetax,gifttaxorotherinheritancetaxesonpropertyat
deathorgifttransfer.Somejurisdictionsimposetaxesonfinancialorcapitaltransactions.
Propertytax
Apropertytax(ormillagetax)isanadvaloremtaxlevyonthevalueofpropertythattheownerofthe
propertyisrequiredtopaytoagovernmentinwhichthepropertyissituated.Multiplejurisdictionsmay
taxthesameproperty.Therearethreegeneralvarietiesofproperty:land,improvementstoland
(immovablemanmadethings,e.g.buildings)andpersonalproperty(movablethings).Realestateor
realtyisthecombinationoflandandimprovementstoland.
Propertytaxesareusuallychargedonarecurrentbasis(e.g.,yearly).Acommontypeofpropertytaxis
anannualchargeontheownershipofrealestate,wherethetaxbaseistheestimatedvalueofthe
property.Foraperiodofover150yearsfrom1695awindowtaxwasleviedinEngland,withtheresult
thatonecanstillseelistedbuildingswithwindowsbrickedupinordertosavetheirownersmoney.A
similartaxonhearthsexistedinFranceandelsewhere,withsimilarresults.Thetwomostcommontype
ofeventdrivenpropertytaxesarestampduty,chargeduponchangeofownership,andinheritancetax,
whichisimposedinmanycountriesontheestatesofthedeceased.
Incontrastwithataxonrealestate(landandbuildings),aLandValueTax(orLVT)isleviedonlyon
theunimprovedvalueoftheland("land"inthisinstancemaymeaneithertheeconomicterm,i.e.,all
naturalresources,orthenaturalresourcesassociatedwithspecificareasoftheEarth'ssurface:"lots"or
"landparcels").Proponentsoflandvaluetaxarguethatitiseconomicallyjustified,asitwillnotdeter
production,distortmarketmechanismsorotherwisecreatedeadweightlossesthewayothertaxesdo.[11]
Whenrealestateisheldbyahighergovernmentunitorsomeotherentitynotsubjecttotaxationbythe
localgovernment,thetaxingauthoritymayreceiveapaymentinlieuoftaxestocompensateitforsome
oralloftheforegonetaxrevenues.
Inmanyjurisdictions(includingmanyAmericanstates),thereisageneraltaxleviedperiodicallyon
residentswhoownpersonalproperty(personalty)withinthejurisdiction.Vehicleandboatregistration
feesaresubsetsofthiskindoftax.Thetaxisoftendesignedwithblanketcoverageandlargeexceptions
forthingslikefoodandclothing.Householdgoodsareoftenexemptwhenkeptorusedwithinthe
household.[12]Anyotherwisenonexemptobjectcanloseitsexemptionifregularlykeptoutsidethe
household.[12]Thus,taxcollectorsoftenmonitornewspaperarticlesforstoriesaboutwealthypeople
whohavelentarttomuseumsforpublicdisplay,becausetheartworkshavethenbecomesubjectto
personalpropertytax.[12]Ifanartworkhadtobesenttoanotherstateforsometouchups,itmayhave
becomesubjecttopersonalpropertytaxinthatstateaswell.[12]
Inheritancetax

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Inheritancetax,estatetax,anddeathtaxordutyarethenamesgiventovarioustaxeswhichariseonthe
deathofanindividual.InUnitedStatestaxlaw,thereisadistinctionbetweenanestatetaxandan
inheritancetax:theformertaxesthepersonalrepresentativesofthedeceased,whilethelattertaxesthe
beneficiariesoftheestate.However,thisdistinctiondoesnotapplyinotherjurisdictionsforexample,if
usingthisterminologyUKinheritancetaxwouldbeanestatetax.
Expatriationtax
Anexpatriationtaxisataxonindividualswhorenouncetheircitizenshiporresidence.Thetaxisoften
imposedbasedonadeemeddispositionofalltheindividual'sproperty.OneexampleistheUnitedStates
undertheAmericanJobsCreationAct,whereanyindividualwhohasanetworthof$2millionoran
averageincometaxliabilityof$127,000whorenounceshisorhercitizenshipandleavesthecountryis
automaticallyassumedtohavedonesofortaxavoidancereasonsandissubjecttoahighertaxrate.[13]
Transfertax
Historically,inmanycountries,acontractneededtohaveastampaffixedtomakeitvalid.Thecharge
forthestampwaseitherafixedamountorapercentageofthevalueofthetransaction.Inmostcountries
thestamphasbeenabolishedbutstampdutyremains.StampdutyisleviedintheUKonthepurchaseof
sharesandsecurities,theissueofbearerinstruments,andcertainpartnershiptransactions.Itsmodern
derivatives,stampdutyreservetaxandstampdutylandtax,arerespectivelychargedontransactions
involvingsecuritiesandland.Stampdutyhastheeffectofdiscouragingspeculativepurchasesofassets
bydecreasingliquidity.IntheUnitedStates,transfertaxisoftenchargedbythestateorlocal
governmentand(inthecaseofrealpropertytransfers)canbetiedtotherecordingofthedeedorother
transferdocuments.
Wealth(networth)tax
Somecountries'governmentswillrequiredeclarationofthetaxpayers'balancesheet(assetsand
liabilities),andfromthatexactataxonnetworth(assetsminusliabilities),asapercentageofthenet
worth,orapercentageofthenetworthexceedingacertainlevel.Thetaxmaybeleviedon"natural"or
legal"persons".AnexampleisFrance'sISF.

Taxesongoodsandservices
Valueaddedtax(GoodsandServicesTax)
Avalueaddedtax(VAT),alsoknownasGoodsandServicesTax(G.S.T),SingleBusinessTax,or
TurnoverTaxinsomecountries,appliestheequivalentofasalestaxtoeveryoperationthatcreates
value.Togiveanexample,sheetsteelisimportedbyamachinemanufacturer.Thatmanufacturerwill
paytheVATonthepurchaseprice,remittingthatamounttothegovernment.Themanufacturerwill
thentransformthesteelintoamachine,sellingthemachineforahigherpricetoawholesaledistributor.
ThemanufacturerwillcollecttheVATonthehigherprice,butwillremittothegovernmentonlythe
excessrelatedtothe"valueadded"(thepriceoverthecostofthesheetsteel).Thewholesaledistributor
willthencontinuetheprocess,chargingtheretaildistributortheVATontheentirepricetotheretailer,
butremittingonlytheamountrelatedtothedistributionmarkuptothegovernment.ThelastVAT
amountispaidbytheeventualretailcustomerwhocannotrecoveranyofthepreviouslypaidVAT.For
aVATandsalestaxofidenticalrates,thetotaltaxpaidisthesame,butitispaidatdifferingpointsin
theprocess.
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VATisusuallyadministratedbyrequiringthecompanytocompleteaVATreturn,givingdetailsof
VATithasbeencharged(referredtoasinputtax)andVATithaschargedtoothers(referredtoas
outputtax).ThedifferencebetweenoutputtaxandinputtaxispayabletotheLocalTaxAuthority.If
inputtaxisgreaterthanoutputtaxthecompanycanclaimbackmoneyfromtheLocalTaxAuthority.
Salestaxes
Salestaxesareleviedwhenacommodityissoldtoitsfinalconsumer.Retailorganizationscontendthat
suchtaxesdiscourageretailsales.Thequestionofwhethertheyaregenerallyprogressiveorregressiveis
asubjectofmuchcurrentdebate.Peoplewithhigherincomesspendalowerproportionofthem,soa
flatratesalestaxwilltendtoberegressive.Itisthereforecommontoexemptfood,utilitiesandother
necessitiesfromsalestaxes,sincepoorpeoplespendahigherproportionoftheirincomesonthese
commodities,sosuchexemptionsmakethetaxmoreprogressive.Thisistheclassic"Youpayforwhat
youspend"tax,asonlythosewhospendmoneyonnonexempt(i.e.luxury)itemspaythetax.
AsmallnumberofU.S.statesrelyentirelyonsalestaxesforstaterevenue,asthosestatesdonotlevya
stateincometax.Suchstatestendtohaveamoderatetolargeamountoftourismorinterstatetravelthat
occurswithintheirborders,allowingthestatetobenefitfromtaxesfrompeoplethestatewould
otherwisenottax.Inthisway,thestateisabletoreducethetaxburdenonitscitizens.TheU.S.states
thatdonotlevyastateincometaxareAlaska,Tennessee,Florida,Nevada,SouthDakota,Texas,[14]
Washingtonstate,andWyoming.Additionally,NewHampshireandTennesseelevystateincometaxes
onlyondividendsandinterestincome.Oftheabovestates,onlyAlaskaandNewHampshiredonotlevy
astatesalestax.AdditionalinformationcanbeobtainedattheFederationofTaxAdministrators
(http://www.taxadmin.org/)website.
IntheUnitedStates,thereisagrowingmovement[15]forthereplacementofallfederalpayrolland
incometaxes(bothcorporateandpersonal)withanationalretailsalestaxandmonthlytaxrebateto
householdsofcitizensandlegalresidentaliens.ThetaxproposalisnamedFairTax.InCanada,the
federalsalestaxiscalledtheGoodsandServicestax(GST)andnowstandsat5%.Theprovincesof
BritishColumbia,Saskatchewan,Manitoba,andPrinceEdwardIslandalsohaveaprovincialsalestax
[PST].TheprovincesofNovaScotia,NewBrunswick,Newfoundland&Labrador,andOntariohave
harmonizedtheirprovincialsalestaxeswiththeGSTHarmonizedSalesTax[HST],andthusisafull
VAT.TheprovinceofQuebeccollectstheQuebecSalesTax[QST]whichisbasedontheGSTwith
certaindifferences.MostbusinessescanclaimbacktheGST,HSTandQSTtheypay,andsoeffectively
itisthefinalconsumerwhopaysthetax.
Excises
Anexcisedutyisanindirecttaximposedupongoodsduringtheprocessoftheirmanufacture,
productionordistribution,andisusuallyproportionatetotheirquantityorvalue.Excisedutieswerefirst
introducedintoEnglandintheyear1643,aspartofaschemeofrevenueandtaxationdevisedby
parliamentarianJohnPymandapprovedbytheLongParliament.Thesedutiesconsistedofchargeson
beer,ale,cider,cherrywineandtobacco,towhichlistwereafterwardsaddedpaper,soap,candles,malt,
hops,andsweets.Thebasicprincipleofexcisedutieswasthattheyweretaxesontheproduction,
manufactureordistributionofarticleswhichcouldnotbetaxedthroughthecustomshouse,andrevenue
derivedfromthatsourceiscalledexciserevenueproper.Thefundamentalconceptionofthetermisthat
ofataxonarticlesproducedormanufacturedinacountry.Inthetaxationofsucharticlesofluxuryas
spirits,beer,tobacco,andcigars,ithasbeenthepracticetoplaceacertaindutyontheimportationof
thesearticles(acustomsduty).[16]

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Excises(orexemptionsfromthem)arealsousedtomodifyconsumptionpatterns(socialengineering).
Forexample,ahighexciseisusedtodiscouragealcoholconsumption,relativetoothergoods.Thismay
becombinedwithhypothecationiftheproceedsarethenusedtopayforthecostsoftreatingillness
causedbyalcoholabuse.Similartaxesmayexistontobacco,pornography,etc.,andtheymaybe
collectivelyreferredtoas"sintaxes".Acarbontaxisataxontheconsumptionofcarbonbasednon
renewablefuels,suchaspetrol,dieselfuel,jetfuels,andnaturalgas.Theobjectistoreducetherelease
ofcarbonintotheatmosphere.IntheUnitedKingdom,vehicleexcisedutyisanannualtaxonvehicle
ownership.

Tariff
Animportorexporttariff(alsocalledcustomsdutyorimpost)isachargeforthemovementofgoods
throughapoliticalborder.Tariffsdiscouragetrade,andtheymaybeusedbygovernmentstoprotect
domesticindustries.Aproportionoftariffrevenuesisoftenhypothecatedtopaygovernmenttomaintain
anavyorborderpolice.Theclassicwaysofcheatingatariffaresmugglingordeclaringafalsevalueof
goods.Tax,tariffandtraderulesinmoderntimesareusuallysettogetherbecauseoftheircommon
impactonindustrialpolicy,investmentpolicy,andagriculturalpolicy.Atradeblocisagroupofallied
countriesagreeingtominimizeoreliminatetariffsagainsttradewitheachother,andpossiblytoimpose
protectivetariffsonimportsfromoutsidethebloc.Acustomsunionhasacommonexternaltariff,and
theparticipatingcountriessharetherevenuesfromtariffsongoodsenteringthecustomsunion.
Insomesocieties,tariffsalsocouldbeimposedbylocalauthoritiesonthemovementofgoodsbetween
regions(orviaspecificinternalgateways).Anotableexampleisthelikin,whichbecameanimportant
revenuesourceforlocalgovernmentsinthelateQingChina.

Othertaxes
Licensefees
Occupationaltaxesorlicensefeesmaybeimposedonbusinessesorindividualsengagedincertain
businesses.Manyjurisdictionsimposeataxonvehicles.
Polltax
Apolltax,alsocalledapercapitatax,orcapitationtax,isataxthatleviesasetamountperindividual.
Itisanexampleoftheconceptoffixedtax.OneoftheearliesttaxesmentionedintheBibleofahalf
shekelperannumfromeachadultJew(Ex.30:1116)wasaformofpolltax.Polltaxesare
administrativelycheapbecausetheyareeasytocomputeandcollectanddifficulttocheat.Economists
haveconsideredpolltaxeseconomicallyefficientbecausepeoplearepresumedtobeinfixedsupplyand
polltaxesthereforedonotleadtoeconomicdistortions.However,polltaxesareveryunpopularbecause
poorerpeoplepayahigherproportionoftheirincomethanricherpeople.[4]Inaddition,thesupplyof
peopleisinfactnotfixedovertime:onaverage,coupleswillchoosetohavefewerchildrenifapolltax
isimposed.[17]TheintroductionofapolltaxinmedievalEnglandwastheprimarycauseofthe1381
Peasants'Revolt.Scotlandwasthefirsttobeusedtotestthenewpolltaxin1989withEnglandand
Walesin1990.Thechangefromaprogressivelocaltaxationbasedonpropertyvaluestoasinglerate
formoftaxationregardlessofabilitytopay(theCommunityCharge,butmorepopularlyreferredtoas
thePollTax),ledtowidespreadrefusaltopayandtoincidentsofcivilunrest,knowncolloquiallyasthe
'PollTaxRiots'.
Other
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Sometypesoftaxeshavebeenproposedbutnotactuallyadoptedinanymajorjurisdiction.These
include:
Banktax
Financialtransactiontaxesincludingcurrencytransactiontaxes

Descriptivelabelsgivensometaxes
Advaloremandperunit
Anadvaloremtaxisonewherethetaxbaseisthevalueofagood,service,orproperty.Salestaxes,
tariffs,propertytaxes,inheritancetaxes,andvalueaddedtaxesaredifferenttypesofadvaloremtax.An
advaloremtaxistypicallyimposedatthetimeofatransaction(salestaxorvalueaddedtax(VAT))but
itmaybeimposedonanannualbasis(propertytax)orinconnectionwithanothersignificantevent
(inheritancetaxortariffs).
Incontrasttoadvaloremtaxationisaperunittax,wherethetaxbaseisthequantityofsomething,
regardlessofitsprice.Anexcisetaxisanexample.
Consumptiontax
Consumptiontaxreferstoanytaxonnoninvestmentspending,andcanbeimplementedbymeansofa
salestax,consumervalueaddedtax,orbymodifyinganincometaxtoallowforunlimiteddeductions
forinvestmentorsavings.
Environmentaltax
Thisincludesnaturalresourcesconsumptiontax,greenhousegastax(Carbontax),"sulfurictax",and
others.Thestatedpurposeistoreducetheenvironmentalimpactbyrepricing.
Proportional,progressive,regressive,andlumpsum
Animportantfeatureoftaxsystemsisthepercentageofthetaxburdenasitrelatestoincomeor
consumption.Thetermsprogressive,regressive,andproportionalareusedtodescribethewaytherate
progressesfromlowtohigh,fromhightolow,orproportionally.Thetermsdescribeadistribution
effect,whichcanbeappliedtoanytypeoftaxsystem(incomeorconsumption)thatmeetsthe
definition.
Aprogressivetaxisataximposedsothattheeffectivetaxrateincreasesastheamounttowhich
therateisappliedincreases.
Theoppositeofaprogressivetaxisaregressivetax,wheretheeffectivetaxratedecreasesasthe
amounttowhichtherateisappliedincreases.Thiseffectiscommonlyproducedwheremeans
testingisusedtowithdrawtaxallowancesorstatebenefits.
Inbetweenisaproportionaltax,wheretheeffectivetaxrateisfixed,whiletheamounttowhich
therateisappliedincreases.
Alumpsumtaxisataxthatisafixedamount,nomatterthechangeincircumstanceofthetaxed
entity.Thisinactualityisaregressivetaxasthosewithlowerincomemustusehigherpercentage
oftheirincomethanthosewithhigherincomeandthereforetheeffectofthetaxreducesasa
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Thetermscanalsobeusedtoapplymeaningtothetaxationofselectconsumption,suchasataxon
luxurygoodsandtheexemptionofbasicnecessitiesmaybedescribedashavingprogressiveeffectsasit
increasesataxburdenonhighendconsumptionanddecreasesataxburdenonlowend
consumption.[18][19][20]
Directandindirect
Taxesaresometimesreferredtoas"directtaxes"or"indirecttaxes".Themeaningofthesetermscan
varyindifferentcontexts,whichcansometimesleadtoconfusion.Aneconomicdefinition,byAtkinson,
statesthat"...directtaxesmaybeadjustedtotheindividualcharacteristicsofthetaxpayer,whereas
indirecttaxesareleviedontransactionsirrespectiveofthecircumstancesofbuyerorseller."[21]
Accordingtothisdefinition,forexample,incometaxis"direct",andsalestaxis"indirect".Inlaw,the
termsmayhavedifferentmeanings.InU.S.constitutionallaw,forinstance,directtaxesrefertopoll
taxesandpropertytaxes,whicharebasedonsimpleexistenceorownership.Indirecttaxesareimposed
onevents,rights,privileges,andactivities.[22]Thus,ataxonthesaleofpropertywouldbeconsideredan
indirecttax,whereasthetaxonsimplyowningthepropertyitselfwouldbeadirecttax.

Feesandeffectivetaxes
Governmentsmaychargeuserfees,tolls,orothertypesofassessmentsinexchangeofparticulargoods,
services,oruseofproperty.Thesearegenerallynotconsideredtaxes,aslongastheyareleviedas
paymentforadirectbenefittotheindividualpaying.[23]Suchfeesinclude:
Tolls:afeechargedtotravelviaaroad,bridge,tunnel,canal,waterwayorothertransportation
facilities.Historicallytollshavebeenusedtopayforpublicbridge,roadandtunnelprojects.They
havealsobeenusedinprivatelyconstructedtransportlinks.Thetollislikelytobeafixedcharge,
possiblygraduatedforvehicletype,orfordistanceonlongroutes.
Userfees,suchasthosechargedforuseofparksorothergovernmentownedfacilities.
Rulingfeeschargedbygovernmentalagenciestomakedeterminationsinparticularsituations.
Somescholarsrefertocertaineconomiceffectsastaxes,thoughtheyarenotleviesimposedby
governments.Theseinclude:
Inflationtax:theeconomicdisadvantagesufferedbyholdersofcashandcashequivalentsinone
denominationofcurrencyduetotheeffectsofexpansionarymonetarypolicy[24]
Financialrepression:Governmentpoliciessuchasinterestratecapsongovernmentdebt,financial
regulationssuchasreserverequirementsandcapitalcontrols,andbarrierstoentryinmarkets
wherethegovernmentownsorcontrolsbusinesses.[25]

History
ThefirstknownsystemoftaxationwasinAncientEgyptaround
30002800BCinthefirstdynastyoftheOldKingdom.[26]The
earliestandmostwidespreadformoftaxationwasthecorveand
tithe.Thecorvewasforcedlabourprovidedtothestateby
peasantstoopoortopayotherformsoftaxation(labourin
Egyptianpeasantsseizedfornon
ancientEgyptianisasynonymfortaxes).[27]Recordsfromthe
paymentoftaxes.(PyramidAge)
timedocumentthatthepharaohwouldconductabiennialtourof
thekingdom,collectingtithesfromthepeople.Otherrecordsare
granaryreceiptsonlimestoneflakesandpapyrus.[28]EarlytaxationisalsodescribedintheBible.In
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Genesis(chapter47,verse24theNewInternationalVersion),itstates"Butwhenthecropcomesin,
giveafifthofittoPharaoh.Theotherfourfifthsyoumaykeepasseedforthefieldsandasfoodfor
yourselvesandyourhouseholdsandyourchildren".JosephwastellingthepeopleofEgypthowto
dividetheircrop,providingaportiontothePharaoh.Ashare(20%)ofthecropwasthetax(inthiscase,
aspecialratherthananordinarytax,asitwasgatheredagainstanexpectedfamine).[29]
InthePersianEmpire,aregulatedandsustainabletaxsystemwasintroducedbyDariusItheGreatin
500BC[30]thePersiansystemoftaxationwastailoredtoeachSatrapy(thearearuledbyaSatrapor
provincialgovernor).Atdifferingtimes,therewerebetween20and30SatrapiesintheEmpireandeach
wasassessedaccordingtoitssupposedproductivity.ItwastheresponsibilityoftheSatraptocollectthe
dueamountandtosendittothetreasury,afterdeductinghisexpenses(theexpensesandthepowerof
decidingpreciselyhowandfromwhomtoraisethemoneyintheprovince,offermaximumopportunity
forrichpickings).Thequantitiesdemandedfromthevariousprovincesgaveavividpictureoftheir
economicpotential.Forinstance,Babylonwasassessedforthehighestamountandforastartling
mixtureofcommodities1,000silvertalentsandfourmonthssupplyoffoodforthearmy.India,a
provincefabledforitsgold,wastosupplygolddustequalinvaluetotheverylargeamountof4,680
silvertalents.EgyptwasknownforthewealthofitscropsitwastobethegranaryofthePersian
Empire(and,later,oftheRomanEmpire)andwasrequiredtoprovide120,000measuresofgrainin
additionto700talentsofsilver.[31]ThistaxwasexclusivelyleviedonSatrapiesbasedontheirlands,
productivecapacityandtributelevels.[32]
TheRosettaStone,ataxconcessionissuedbyPtolemyVin196BCandwritteninthreelanguages"led
tothemostfamousdeciphermentinhistorythecrackingofhieroglyphics".[33]
InIndia,Islamicrulersimposedjizya(apolltaxonnonMuslims)startinginthe11thcentury.

Taxationlevels
NumerousrecordsofgovernmenttaxcollectioninEuropesinceatleastthe17thcenturyarestill
availabletoday.Buttaxationlevelsarehardtocomparetothesizeandflowoftheeconomysince
productionnumbersarenotasreadilyavailable.GovernmentexpendituresandrevenueinFranceduring
the17thcenturywentfromabout24.30millionlivresin160010toabout126.86millionlivresin
165059toabout117.99millionlivresin170010whengovernmentdebthadreached1.6billionlivres.
In178089,itreached421.50millionlivres.[34]Taxationasapercentageofproductionoffinalgoods
mayhavereached15%20%duringthe17thcenturyinplacessuchasFrance,theNetherlands,and
Scandinavia.Duringthewarfilledyearsoftheeighteenthandearlynineteenthcentury,taxratesin
Europeincreaseddramaticallyaswarbecamemoreexpensiveandgovernmentsbecamemore
centralizedandadeptatgatheringtaxes.ThisincreasewasgreatestinEngland,PeterMathiasand
PatrickO'Brienfoundthatthetaxburdenincreasedby85%overthisperiod.Anotherstudyconfirmed
thisnumber,findingthatpercapitataxrevenueshadgrownalmostsixfoldovertheeighteenthcentury,
butthatsteadyeconomicgrowthhadmadetherealburdenoneachindividualonlydoubleoverthis
periodbeforetheindustrialrevolution.EffectivetaxrateswerehigherinBritainthanFrancetheyears
beforetheFrenchRevolution,twiceinpercapitaincomecomparison,buttheyweremostlyplacedon
internationaltrade.InFrance,taxeswerelowerbuttheburdenwasmainlyonlandowners,individuals,
andinternaltradeandthuscreatedfarmoreresentment.[35]
TaxationasapercentageofGDPin2003was56.1%inDenmark,54.5%inFrance,49.0%intheEuro
area,42.6%intheUnitedKingdom,35.7%intheUnitedStates,35.2%inIreland,andamongallOECD
membersanaverageof40.7%.[36][37]
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Formsoftaxation
Inmonetaryeconomiespriortofiatbanking,acriticalformoftaxationwasseigniorage,thetaxonthe
creationofmoney.
Otherobsoleteformsoftaxationinclude:
Scutage,whichispaidinlieuofmilitaryservicestrictlyspeaking,itisacommutationofanon
taxobligationratherthanataxassuchbutfunctioningasataxinpractice.
Tallage,ataxonfeudaldependents.
Tithe,ataxlikepayment(onetenthofone'searningsoragriculturalproduce),paidtotheChurch
(andthustoospecifictobeataxinstricttechnicalterms).Thisshouldnotbeconfusedwiththe
modernpracticeofthesamenamewhichisnormallyvoluntary.
(Feudal)aids,atypeoftaxorduethatwaspaidbyavassaltohislordduringfeudaltimes.
Danegeld,amedievallandtaxoriginallyraisedtopayoffraidingDanesandlaterusedtofund
militaryexpenditures.
Carucage,ataxwhichreplacedthedanegeldinEngland.
Taxfarming,theprincipleofassigningtheresponsibilityfortaxrevenuecollectiontoprivate
citizensorgroups.
Socage,afeudaltaxsystembasedonlandrent.
Burgage,afeudaltaxsystembasedonlandrent.
Someprincipalitiestaxedwindows,doors,orcabinetstoreduceconsumptionofimportedglassand
hardware.Armoires,hutches,andwardrobeswereemployedtoevadetaxesondoorsandcabinets.In
somecircumstances,taxesarealsousedtoenforcepublicpolicylikecongestioncharge(tocutroad
trafficandencouragepublictransport)inLondon.InTsaristRussia,taxeswereclampedonbeards.
Today,oneofthemostcomplicatedtaxationsystemsworldwideisinGermany.Threequartersofthe
world'staxationliteraturereferstotheGermansystem.UndertheGermansystem,thereare118laws,
185forms,and96,000regulations,spending3.7billiontocollecttheincometax.IntheUnitedStates,
theIRShasabout1,177formsandinstructions,[38]28.4111megabytesofInternalRevenueCode[39]
whichcontained3.8millionwordsasof1February2010,[40]numeroustaxregulationsintheCodeof
FederalRegulations,[41]andsuppmentarymaterialintheInternalRevenueBulletin.[42]Today,
governmentsinmoreadvancedeconomies(i.e.EuropeandNorthAmerica)tendtorelymoreondirect
taxes,whiledevelopingeconomies(i.e.IndiaandseveralAfricancountries)relymoreonindirecttaxes.

Economiceffects
Ineconomicterms,taxationtransferswealthfromhouseholdsorbusinessestothegovernmentofa
nation.Thesideeffectsoftaxation(suchaseconomicdistortions)andtheoriesabouthowbesttotaxare
animportantsubjectinmicroeconomics.[4]Taxationisalmostneverasimpletransferofwealth.
Economictheoriesoftaxationapproachthequestionofhowtomaximizeeconomicwelfarethrough
taxation.

Taxincidence
Lawestablishesfromwhomataxiscollected.Inmanycountries,taxesareimposedonbusiness(suchas
corporatetaxesorportionsofpayrolltaxes).However,whoultimatelypaysthetax(thetax"burden")is
determinedbythemarketplaceastaxesbecomeembeddedintoproductioncosts.Economictheory
suggeststhattheeconomiceffectoftaxdoesnotnecessarilyfallatthepointwhereitislegallylevied.
Forinstance,ataxonemploymentpaidbyemployerswillimpactontheemployee,atleastinthelong
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run.Thegreatestshareofthetaxburdentendstofallonthemostinelasticfactorinvolvedthepartof
thetransactionwhichisaffectedleastbyachangeinprice.So,forinstance,ataxonwagesinatown
will(atleastinthelongrun)affectpropertyownersinthatarea.
Dependingonhowquantitiessuppliedanddemandedvarywithprice(the"elasticities"ofsupplyand
demand),ataxcanbeabsorbedbytheseller(intheformoflowerpretaxprices),orbythebuyer(inthe
formofhigherposttaxprices).[4]Iftheelasticityofsupplyislow,moreofthetaxwillbepaidbythe
supplier.Iftheelasticityofdemandislow,morewillbepaidbythecustomerand,contrariwiseforthe
caseswherethoseelasticitiesarehigh.Ifthesellerisacompetitivefirm,thetaxburdenisdistributed
overthefactorsofproductiondependingontheelasticitiesthereofthisincludesworkers(intheformof
lowerwages),capitalinvestors(intheformoflosstoshareholders),landowners(intheformoflower
rents),entrepreneurs(intheformoflowerwagesofsuperintendence)andcustomers(intheformof
higherprices).
Toshowthisrelationship,supposethatthemarketpriceofaproductis$1.00,andthata$0.50taxis
imposedontheproductthat,bylaw,istobecollectedfromtheseller.Iftheproducthasanelastic
demand,agreaterportionofthetaxwillbeabsorbedbytheseller.Thisisbecausegoodswithelastic
demandcausealargedeclineinquantitydemandedforasmallincreaseinprice.Thereforeinorderto
stabilizesales,thesellerabsorbsmoreoftheadditionaltaxburden.Forexample,thesellermightdrop
thepriceoftheproductto$0.70sothat,afteraddinginthetax,thebuyerpaysatotalof$1.20,or$0.20
morethanhedidbeforethe$0.50taxwasimposed.Inthisexample,thebuyerhaspaid$0.20ofthe
$0.50tax(intheformofaposttaxprice)andthesellerhaspaidtheremaining$0.30(intheformofa
lowerpretaxprice).[43]

Increasedeconomicwelfare
Governmentspending
Thepurposeoftaxationistoprovideforgovernmentspendingwithoutinflation.Theprovisionofpublic
goodssuchasroadsandotherinfrastructure,schools,asocialsafetynet,healthcarefortheindigent,
nationaldefense,lawenforcement,andacourtssystemincreasestheeconomicwelfareofsocietyifthe
benefitoutweighsthecostsinvolved.
Pigoviantaxes
Theexistenceofataxcanincreaseeconomicefficiencyinsomecases.Ifthereisanegativeexternality
associatedwithagood,meaningthatithasnegativeeffectsnotfeltbytheconsumer,thenafreemarket
willtradetoomuchofthatgood.Bytaxingthegood,thegovernmentcanincreaseoverallwelfareas
wellasraisingrevenue.ThistypeoftaxiscalledaPigoviantax,aftereconomistArthurPigou.
PossiblePigoviantaxesincludethoseonpollutingfuels(likepetrol),taxesongoodswhichincurpublic
healthcarecosts(suchasalcoholortobacco),andchargesforexisting'free'publicgoods(like
congestioncharging)areanotherpossibility.
Reducedinequality
Progressivetaxationmayreduceeconomicinequality.Thiseffectoccursevenwhenthetaxrevenueisn't
redistributed.[citationneeded]

Reducedeconomicwelfare
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Mosttaxes(seebelow)havesideeffectsthatreduceeconomicwelfare,eitherbymandating
unproductivelabor(compliancecosts)orbycreatingdistortionstoeconomicincentives(deadweight
lossandperverseincentives).
Costofcompliance
Althoughgovernmentsmustspendmoneyontaxcollectionactivities,someofthecosts,particularlyfor
keepingrecordsandfillingoutforms,arebornebybusinessesandbyprivateindividuals.Theseare
collectivelycalledcostsofcompliance.Morecomplextaxsystemstendtohavehighercompliancecosts.
Thisfactcanbeusedasthebasisforpracticalormoralargumentsinfavoroftaxsimplification(suchas
theFairTaxorOneTax,andsomeflattaxproposals).
Deadweightcostsoftaxation
Intheabsenceofnegativeexternalities,the
introductionoftaxesintoamarketreduceseconomic
efficiencybycausingdeadweightloss.Ina
competitivemarketthepriceofaparticular
economicgoodadjuststoensurethatalltrades
whichbenefitboththebuyerandthesellerofagood
occur.Theintroductionofataxcausestheprice
receivedbythesellertobelessthanthecosttothe
buyerbytheamountofthetax.Thiscausesfewer
transactionstooccur,whichreduceseconomic
welfaretheindividualsorbusinessesinvolvedare
lesswelloffthanbeforethetax.Thetaxburdenand
theamountofdeadweightcostisdependentonthe
elasticityofsupplyanddemandforthegoodtaxed.

Diagramillustratingdeadweightcostsoftaxes

Mosttaxesincludingincometaxandsalestaxcanhavesignificantdeadweightcosts.Theonlyway
toavoiddeadweightcostsinaneconomythatisgenerallycompetitiveistorefrainfromtaxesthat
changeeconomicincentives.Suchtaxesincludethelandvaluetax,[44]wherethetaxisonagoodin
completelyinelasticsupply,alumpsumtaxsuchasapolltax(headtax)whichispaidbyalladults
regardlessoftheirchoices.Arguablyawindfallprofitstaxwhichisentirelyunanticipatedcanalsofall
intothiscategory.
Deadweightlossdoesnotaccountfortheeffecttaxeshaveinlevelingthebusinessplayingfield.
Businessthathavemoremoneyarebettersuitedtofendoffcompetition.Itiscommonthatanindustry
havingafewbutverylargecorporationshaveaveryhighbarrierofentryofnewentrantsinthe
marketplace.Thisisduetothefactthatthelargerthecorporationthebetterthepositionofittonegotiate
withsuppliers.Alsothefinancialpositioncanprovidethemeansforthecompanytobeabletooperate
forextendedperiodsoftimewithverylowornegativeprofits,inordertopushthecompetitionoutof
business.Thetaxationofprofitsinaprogressivemannerwouldreducethebarriersforentryinaspecific
marketfornewentrantstherebyincreasingcompetition.Thiswouldultimatelybenefittheconsumers
sinceincreasedcompetitionbenefitsconsumers.[45]
Perverseincentives

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Complexityofthetaxcodeindevelopedeconomiesofferperversetaxincentives.Themoredetailsof
taxpolicythereare,themoreopportunitiesforlegaltaxavoidanceandillegaltaxevasion.Thesenot
onlyresultinlostrevenue,butinvolveadditionalcosts:forinstance,paymentsmadefortaxadviceare
essentiallydeadweightcostsbecausetheyaddnowealthtotheeconomy.Perverseincentivesalsooccur
becauseofnontaxable'hidden'transactionsforinstance,asalefromonecompanytoanothermightbe
liableforsalestax,butifthesamegoodswereshippedfromonebranchofacorporationtoanother,no
taxwouldbepayable.
Toaddresstheseissues,economistsoftensuggestsimpleandtransparenttaxstructureswhichavoid
providingloopholes.Salestax,forinstance,canbereplacedwithavalueaddedtaxwhichdisregards
intermediatetransactions.
Reducedproduction
Ifataxispaidonoutsourcedservicesthatisnotalsochargedonservicesperformedforoneself,thenit
maybecheapertoperformtheservicesoneselfthantopaysomeoneelseevenconsideringlossesin
economicefficiency.[46][47]
Forexample,supposejobsAandBarebothvaluedat$1onthemarket.Andsupposethatbecauseof
youruniqueabilities,youcandojobAtwiceover(100%extraoutput)inthesameeffortasitwould
takeyoutodojobB.ButjobBistheonethatyouneeddonerightnow.Underperfectdivisionoflabor,
youwoulddojobAandsomebodyelsewoulddojobB.Youruniqueabilitieswouldalwaysbe
rewarded.
Incometaxationhastheworsteffectondivisionoflaborintheformofbarter.Supposethattheperson
doingjobBisactuallyinterestedinhavingjobAdoneforhim.Nowsupposeyoucouldamazinglydo
jobAfourtimesover,sellinghalfyourworkonthemarketforcashjusttopayyourtaxbill.Theother
halfoftheworkyoudoforsomebodywhodoesjobBtwiceoverbuthehastoselloffhalftopayhistax
bill.You'releftwithoneunitofjobB,butonlyifyouwere400%asproductivedoingjobA!Inthiscase
of50%taxonbarterincome,anythinglessthan400%productivitywillcausethedivisionoflaborto
fail.
Insummary,dependingonthesituationa50%taxratecancausethedivisionoflabortofailevenwhere
productivitygainsofupto300%wouldhaveresulted.Evenamere30%taxratecannegatethe
advantageofa100%productivitygain.[48]

Taxationindevelopingcountries
ResearchersforEPSPEAKS[49]statedthatthecorepurposeoftaxationisrevenuemobilisation,
providingresourcesforNationalBudgets,andforminganimportantpartofmacroeconomic
management.Theysaideconomictheoryhasfocusedontheneedto'optimise'thesystemthrough
balancingefficiencyandequity,understandingtheimpactsonproduction,andconsumptionaswellas
distribution,redistribution,andwelfare.
Theystatethattaxesandtaxreliefshavealsobeenusedasatoolforbehaviouralchange,toinfluence
investmentdecisions,laboursupply,consumptionpatterns,andpositiveandnegativeeconomicspill
overs(externalities),andultimately,thepromotionofeconomicgrowthanddevelopment.Thetax
systemanditsadministrationalsoplayanimportantroleinstatebuildingandgovernance,asaprinciple
formof'socialcontract'betweenthestateandcitizenswhocan,astaxpayers,exertaccountabilityonthe
stateasaconsequence.
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Theresearcherswrotethatdomesticrevenueformsanimportantpartofadevelopingcountry'spublic
financingasitismorestableandpredictablethanOverseasDevelopmentAssistanceandnecessaryfora
countrytobeselfsufficient.Theyfoundthatdomesticrevenueflowsare,onaverage,alreadymuch
largerthanODA,withaidworthlessthan10%ofcollectedtaxesinAfricaasawhole.
However,inaquarterofAfricancountriesOverseasDevelopmentAssistancedoesexceedtax
collection,[50]withthesemorelikelytobenonresourcerichcountries.Thissuggestscountriesmaking
mostprogressreplacingaidwithtaxrevenuetendtobethosebenefitingdisproportionatelyfromrising
pricesofenergyandcommodities.
Theauthor[49]foundtaxrevenueasapercentageofGDPvaryinggreatlyaroundaglobalaverageof
19%.[51]ThisdataalsoindicatescountrieswithhigherGDPtendtohavehighertaxtoGDPratios,
demonstratingthathigherincomeisassociatedwithmorethanproportionatelyhighertaxrevenue.On
average,highincomecountrieshavetaxrevenueasapercentageofGDPofaround22%,comparedto
18%inmiddleincomecountriesand14%inlowincomecountries.
Inhighincomecountries,thehighesttaxtoGDPratioisinDenmarkat47%andthelowestisinKuwait
at0.8%,reflectinglowtaxesfromstrongoilrevenues.Longtermaverageperformanceoftaxrevenueas
ashareofGDPinlowincomecountrieshasbeenlargelystagnant,althoughmosthaveshownsome
improvementinmorerecentyears.Onaverage,resourcerichcountrieshavemadethemostprogress,
risingfrom10%inthemid90stoaround17%in2008.Nonresourcerichcountriesmadesome
progress,withaveragetaxrevenuesincreasingfrom10%to15%overthesameperiod.[52]
ManylowincomecountrieshaveataxtoGDPratiooflessthan15%whichcouldbeduetolowtax
potential,suchasalimitedtaxableeconomicactivity,orlowtaxeffortduetopolicychoice,non
compliance,oradministrativeconstraints.
SomelowincomecountrieshaverelativelyhightaxtoGDPratiosduetoresourcetaxrevenues(e.g.
Angola)orrelativelyefficienttaxadministration(e.g.Kenya,Brazil)whereassomemiddleincome
countrieshavelowertaxtoGDPratios(e.g.Malaysia)whichreflectamoretaxfriendlypolicychoice.
Whileoveralltaxrevenueshaveremainedbroadlyconstant,theglobaltrendshowstradetaxeshave
beendecliningasaproportionoftotalrevenues(IMF,2011),withtheshareofrevenueshiftingaway
frombordertradetaxestowardsdomesticallyleviedsalestaxesongoodsandservices.Lowincome
countriestendtohaveahigherdependenceontradetaxes,andasmallerproportionoffromincomeand
consumptiontaxes,whencomparedtohighincomecountries.[53]
Oneindicatorofthetaxpayingexperiencewascapturedinthe'DoingBusiness'survey,[54]which
comparesthetotaltaxrate,timespentcomplyingwithtaxproceduresandthenumberofpayments
requiredthroughtheyear,across176countries.The'easiest'countriesinwhichtopaytaxesarelocated
intheMiddleEastwiththeUAErankingfirst,followedbyQatarandSaudiArabia,mostlikely
reflectinglowtaxregimesinthosecountries.CountriesinSubSaharanAfricaareamongthe'hardest'to
paywiththeCentralAfricanRepublic,RepublicofCongo,GuineaandChadinthebottom5,reflecting
highertotaltaxratesandagreateradministrativeburdentocomply.

Keyfacts
ThebelowfactswerecompiledbyEPSPEAKSresearchers[49]
TradeliberalisationhasledtoadeclineintradetaxesasashareoftotalrevenuesandGDP.[49][55]
ResourcerichcountriestendtocollectmorerevenueasashareofGDP,butthisismorevolatile.
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SubSaharanAfricancountriesthatareresourcerichhaveperformedbettertaxcollectingthan
nonresourcerichcountries,butrevenuesaremorevolatilefromyeartoyear.[56]Bystrengthening
revenuemanagement,therearehugeopportunitiesforinvestmentfordevelopmentandgrowth
[49][57]

Developingcountrieshaveaninformalsectorrepresentinganaverageofaround40%,perhapsup
to60%insome.[58]Informalsectorsfeaturemanysmallinformaltraderswhomaynotbeefficient
inbringingintothetaxnet,sincethecostofcollectionishighandrevenuepotentiallimited
(althoughtherearebroadergovernancebenefits).Thereisalsoanissueofnoncompliant
companieswhoare'hardtotax',evadingtaxesandshouldbebroughtintothetaxnet.[49][59]
Inmanylowincomecountries,themajorityofrevenueiscollectedfromanarrowtaxbase,
sometimesbecauseofalimitedrangeoftaxableeconomicactivities.Thereistherefore
dependenceonfewtaxpayers,oftenmultinationals,thatcanexacerbatetherevenuechallengeby
minimisingtheirtaxliability,insomecasesabusingalackofcapacityinrevenueauthorities,
sometimesthroughtransferpricingabuse[49][59]
Developinganddevelopedcountriesfacehugechallengesintaxingmultinationalsand
internationalcitizens.Estimatesoftaxrevenuelossesfromevasionandavoidanceindeveloping
countriesarelimitedbyalackofdataandmethodologicalshortcomings,butsomeestimatesare
significant[49][60]
Countriesuseincentivestoattractinvestmentbutdoingthismaybeunnecessarilygivingup
revenueasevidencesuggeststhatinvestorsareinfluencedmorebyeconomicfundamentalslike
marketsize,infrastructure,andskills,andonlymarginallybytaxincentives(IFCinvestor
surveys)[49]
Inlowincomecountries,compliancecostsarehigh,theyarelengthyprocesses,frequenttax
payments,bribesandcorruption[49][59][61]
Administrationsareoftenunderresourced,resourcesaren'teffectivelytargetedonareasof
greatestimpact,andmidlevelmanagementisweak.Coordinationbetweendomesticandcustoms
isweak,whichisespeciallyimportantforVAT.Weakadministration,governanceandcorruption
tendtobeassociatedwithlowrevenuecollections(IMF,2011)[49]
Evidenceontheeffectofaidontaxrevenuesisinconclusive.Taxrevenueismorestableand
sustainablethanaid.Whileadisincentiveeffectofaidonrevenuemaybeexpectedandwas
supportedbysomeearlystudies,recentevidencedoesnotsupportthatconclusion,andinsome
cases,pointstowardshighertaxrevenuefollowingsupportforrevenuemobilisation.[49]
Ofallregions,Africahasthehighesttotaltaxratesbornebybusinessat57.4%ofprofiton
average,buthasreducedthemostsince2004,from70%,partlyduetointroducingVATandthis
islikelytohaveabeneficialeffectonattractinginvestment.[49][62]
FragilestatesarelessabletoexpandtaxrevenueasapercentageofGDPandanygainsaremore
difficulttosustain.[63]Taxadministrationtendstocollapseifconflictreducesstatecontrolled
territoryorreducesproductivity.[64]Aseconomiesarerebuiltafterconflicts,therecanbegood
progressindevelopingeffectivetaxsystems.Liberiaexpandedfrom10.6%ofGDPin2003to
21.3%in2011.Mozambiqueincreasedfrom10.5%ofGDPin1994toaround17.7%in
2011.[49][65]

Summary
Aidinterventionsinrevenuecansupportrevenuemobilisationforgrowth,improvetaxsystemdesign
andadministrativeeffectiveness,andstrengthengovernanceandcompliance.[49]Theauthorofthe
EconomicsTopicGuidefoundthatthebestaidmodalitiesforrevenuedependoncountrycircumstances,
butshouldaimtoalignwithgovernmentinterestsandfacilitateeffectiveplanningandimplementation
ofactivitiesunderanevidencebasedtaxreform.Lastly,shefoundthatidentifyingareasforfurther

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reformrequirescountryspecificdiagnosticassessment:broadareasfordevelopingcountriesidentified
internationally(e.g.IMF)include,forexamplepropertytaxationforlocalrevenues,strengthening
expendituremanagement,andeffectivetaxationofextractiveindustriesandmultinationals.[49]

Viewsontaxation
Supportfortaxation
Accordingtomostpoliticalphilosophies,taxesarejustifiedastheyfund
activitiesthatarenecessaryandbeneficialtosociety.Additionally,
progressivetaxationcanbeusedtoreduceeconomicinequalityina
society.Accordingtothisview,taxationinmodernnationstatesbenefit
themajorityofthepopulationandsocialdevelopment.[67]Acommon
presentationofthisview,paraphrasingvariousstatementsbyOliver
WendellHolmes,Jr.is"Taxesarethepriceofcivilization".[68]

Everytax,however,is,tothe
personwhopaysit,abadge,
notofslavery,butofliberty.
AdamSmith(1776),
WealthofNations[66]

Itcanalsobearguedthatinademocracy,becausethegovernmentisthe
partyperformingtheactofimposingtaxes,societyasawholedecideshowthetaxsystemshouldbe
organized.[69]TheAmericanRevolution's"Notaxationwithoutrepresentation"sloganimpliedthisview.
Fortraditionalconservatives,thepaymentoftaxationisjustifiedaspartofthegeneralobligationsof
citizenstoobeythelawandsupportestablishedinstitutions.Theconservativepositionisencapsulatedin
perhapsthemostfamousadageofpublicfinance,"Anoldtaxisagoodtax".[70]Conservativesadvocate
the"fundamentalconservativepremisethatnooneshouldbeexcusedfrompayingforgovernment,lest
theycometobelievethatgovernmentiscostlesstothemwiththecertainconsequencethattheywill
demandmoregovernment'services'."[71]Socialdemocratsgenerallyfavorhigherlevelsoftaxationto
fundpublicprovisionofawiderangeofservicessuchasuniversalhealthcareandeducation,aswellas
theprovisionofarangeofwelfarebenefits.[72]AsarguedbyTonyCroslandandothers,thecapacityto
taxincomefromcapitalisacentralelementofthesocialdemocraticcaseforamixedeconomyas
againstMarxistargumentsforcomprehensivepublicownershipofcapital.[73]Manylibertarians
recommendaminimalleveloftaxationinordertomaximizetheprotectionofliberty.
Compulsorytaxationofindividuals,suchasincometax,isoftenjustifiedongroundsincludingterritorial
sovereignty,andthesocialcontract.Defendersofbusinesstaxationarguethatitisanefficientmethodof
taxingincomethatultimatelyflowstoindividuals,orthatseparatetaxationofbusinessisjustifiedonthe
groundsthatcommercialactivitynecessarilyinvolvesuseofpubliclyestablishedandmaintained
economicinfrastructure,andthatbusinessesareineffectchargedforthisuse.[74]Georgisteconomists
arguethatalloftheeconomicrentcollectedfromnaturalresources(land,mineralextraction,fishing
quotas,etc.)isunearnedincome,andbelongstothecommunityratherthananyindividual.They
advocateahightax(the"SingleTax")onlandandothernaturalresourcestoreturnthisunearnedincome
tothestate,butnoothertaxes.

Oppositiontotaxation
Becausepaymentoftaxiscompulsoryandenforcedbythelegalsystem,somepoliticalphilosophies
viewtaxationastheft,extortion,(orasslavery,orasaviolationofpropertyrights),ortyranny,accusing
thegovernmentoflevyingtaxesviaforceandcoercivemeans.[75]Voluntaryists,individualistanarchists,
Objectivists,anarchocapitalists,andlibertariansseetaxationasgovernmentaggression(seezero
aggressionprinciple).Theviewthatdemocracylegitimizestaxationisrejectedbythosewhoarguethat
allformsofgovernment,includinglawschosenbydemocraticmeans,arefundamentallyoppressive.
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AccordingtoLudwigvonMises,"societyasawhole"shouldnotmakesuchdecisions,dueto
methodologicalindividualism.[76]Libertarianopponentsoftaxationclaimthatgovernmentalprotection,
suchaspoliceanddefenseforcesmightbereplacedbymarketalternativessuchasprivatedefense
agencies,arbitrationagenciesorvoluntarycontributions.[77]WalterE.Williams,professorofeconomics
atGeorgeMasonUniversity,stated"Governmentincomeredistributionprogramsproducethesame
resultastheft.Infact,that'swhatathiefdoesheredistributesincome.Thedifferencebetween
governmentandthieveryismostlyamatteroflegality."[78]

Socialistview
KarlMarxassumedthattaxationwouldbeunnecessaryaftertheadventofcommunismandlooked
forwardtothe"witheringawayofthestate".InsocialisteconomiessuchasthatofChina,taxation
playedaminorrole,sincemostgovernmentincomewasderivedfromtheownershipofenterprises,and
itwasarguedbysomethatmonetarytaxationwasnotnecessary.[79]Whilethemoralityoftaxationis
sometimesquestioned,mostargumentsabouttaxationrevolvearoundthedegreeandmethodoftaxation
andassociatedgovernmentspending,nottaxationitself.

Taxchoice
Taxchoiceisthetheorythattaxpayersshouldhavemorecontrolwithhowtheirindividualtaxesare
allocated.Iftaxpayerscouldchoosewhichgovernmentorganizationsreceivedtheirtaxes,opportunity
costdecisionswouldintegratetheirpartialknowledge.[80]Forexample,ataxpayerwhoallocatedmore
ofhistaxesonpubliceducationwouldhavelesstoallocateonpublichealthcare.Supportersarguethat
allowingtaxpayerstodemonstratetheirpreferenceswouldhelpensurethatthegovernmentsucceedsat
efficientlyproducingthepublicgoodsthattaxpayerstrulyvalue.[81]ouldendrealestatespeculation,
businesscycles,unemploymentanddistributewealthmuchmoreevenly.JosephStiglitz'sHenryGeorge
TheorempredictsitssufficiencybecauseasGeorgealsonotedpublicspendingraiseslandvalue.

GeoistView
Geoists(Georgistsandgeolibertarians)statethattaxationshouldprimarilycollecteconomicrent,in
particularthevalueofland,forbothreasonsofeconomicefficiencyaswellasmorality.Theefficiency
ofusingeconomicrentfortaxationis(aseconomistsagree[82][83][84])duetothefactthatsuchtaxation
cannotbepassedonanddoesnotcreateanydeadweightloss,andthatitremovestheincentiveto
speculateonland.[85]ItsmoralityisbasedontheGeoistpremisethatprivatepropertyisjustifiedfor
productsoflabourbutnotforlandandnaturalresources.[86]
EconomistandsocialreformerHenryGeorgeopposedsalestaxesandprotectivetariffsfortheirnegative
impactontrade.[87]Healsobelievedintherightofeachpersontothefruitsoftheirownlabourand
productiveinvestment.Thereforeincomefromlabourand'proper'capitalshouldremainuntaxed.For
thisreasonmanyGeoistsinparticularthosethatcallthemselvesgeolibertariansharetheviewwith
libertariansthatthesetypesoftaxation(butnotall)areimmoralandeventheft.Georgestatedthere
shouldbeonesingletax:theLandValueTax,whichisconsideredbothefficientandmoral.[86]Demand
forspecificlandisdependentonnature,butevenmoresoonthepresenceofcommunities,trade,and
governmentinfrastructure,particularlyinurbanenvironments.Thereforetheeconomicrentoflandis
nottheproductofoneparticularindividualanditmaybeclaimedforpublicexpenses.Accordingto

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George,thiswouldendrealestatebubbles,businesscycles,unemploymentanddistributewealthmuch
moreevenly.[86]JosephStiglitz'sHenryGeorgeTheorempredictsitssufficiencyforfinancingpublic
goodsbecausethoseraiselandvalue.[88]
JohnLockestatedthatwheneverlabourismixedwithnaturalresources,suchasisthecasewith
improvedland,privatepropertyisjustifiedundertheprovisothattheremustbeenoughothernatural
resourcesofthesamequalityavailabletoothers.[89]GeoistsstatethattheLockeanprovisoisviolated
whereverlandvalueisgreaterthanzero.Thereforeundertheassumedprincipleofequalrightsofall
peopletonaturalresources,theoccupierofanysuchlandmustcompensatetherestofsocietytothe
amountofthatvalue.Forthisreason,geoistsgenerallybelievethatsuchpaymentcannotberegardedas
atrue'tax',butratheracompensationorfee.[90]ThismeansthatwhileGeoistsalsoregardtaxationasan
instrumentofsocialjustice,contrarytosocialdemocratsandsocialliberalstheydonotregarditasan
instrumentofredistributionbutrathera'predistribution'orsimplyacorrectdistributionofthe
commons.[91]
Moderngeoistsnotethatlandintheclassicaleconomicmeaningofthewordreferredtoallnatural
resources,andthusalsoincludesresourcessuchasmineraldeposits,waterbodiesandthe
electromagneticspectrum,towhichprivilegedaccessalsogenerateseconomicrentthatmustbe
compensated.Underthesamereasoningmostofthemalsoconsiderpigouviantaxesascompensationfor
environmentaldamageorprivilegeasacceptableandevennecessary.[92][93]

Theoriesontaxation
Laffercurve
Ineconomics,theLaffercurveisatheoreticalrepresentationoftherelationshipbetweengovernment
revenueraisedbytaxationandallpossibleratesoftaxation.Itisusedtoillustratetheconceptoftaxable
incomeelasticity(thattaxableincomewillchangeinresponsetochangesintherateoftaxation).The
curveisconstructedbythoughtexperiment.First,theamountoftaxrevenueraisedattheextremetax
ratesof0%and100%isconsidered.Itisclearthata0%taxrateraisesnorevenue,buttheLaffercurve
hypothesisisthata100%taxratewillalsogeneratenorevenuebecauseatsucharatethereisnolonger
anyincentiveforarationaltaxpayertoearnanyincome,thustherevenueraisedwillbe100%of
nothing.Ifbotha0%rateand100%rateoftaxationgeneratenorevenue,itfollowsfromtheextreme
valuetheoremthattheremustexistatleastonerateinbetweenwheretaxrevenuewouldbeamaximum.
TheLaffercurveistypicallyrepresentedasagraphwhichstartsat0%tax,zerorevenue,risestoa
maximumrateofrevenueraisedatanintermediaterateoftaxationandthenfallsagaintozerorevenue
ata100%taxrate.
OnepotentialresultoftheLaffercurveisthatincreasingtaxratesbeyondacertainpointwillbecome
counterproductiveforraisingfurthertaxrevenue.AhypotheticalLaffercurveforanygiveneconomy
canonlybeestimatedandsuchestimatesaresometimescontroversial.TheNewPalgraveDictionaryof
Economicsreportsthatestimatesofrevenuemaximizingtaxrateshavevariedwidely,withamidrange
ofaround70%.[94]

Optimaltax
Mostgovernmentstakerevenuewhichexceedsthatwhichcanbeprovidedbynondistortionarytaxesor
throughtaxeswhichgiveadoubledividend.Optimaltaxationtheoryisthebranchofeconomicsthat
considershowtaxescanbestructuredtogivetheleastdeadweightcosts,ortogivethebestoutcomesin
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termsofsocialwelfare.[4]TheRamseyproblemdealswithminimizingdeadweightcosts.Because
deadweightcostsarerelatedtotheelasticityofsupplyanddemandforagood,itfollowsthatputtingthe
highesttaxratesonthegoodsforwhichthereismostinelasticsupplyanddemandwillresultintheleast
overalldeadweightcosts.Someeconomistssoughttointegrateoptimaltaxtheorywiththesocialwelfare
function,whichistheeconomicexpressionoftheideathatequalityisvaluabletoagreaterorlesser
extent.Ifindividualsexperiencediminishingreturnsfromincome,thentheoptimumdistributionof
incomeforsocietyinvolvesaprogressiveincometax.Mirrleesoptimalincometaxisadetailed
theoreticalmodeloftheoptimumprogressiveincometaxalongtheselines.Overthelastyearsthe
validityofthetheoryofoptimaltaxationwasdiscussedbymanypoliticaleconomists.[95]

Taxrates
Taxesaremostoftenleviedasapercentage,calledthetaxrate.Animportantdistinctionwhentalking
abouttaxratesistodistinguishbetweenthemarginalrateandtheeffectivetaxrate.Theeffectiverateis
thetotaltaxpaiddividedbythetotalamountthetaxispaidon,whilethemarginalrateistheratepaid
onthenextdollarofincomeearned.Forexample,ifincomeistaxedonaformulaof5%from$0upto
$50,000,10%from$50,000to$100,000,and15%over$100,000,ataxpayerwithincomeof$175,000
wouldpayatotalof$18,750intaxes.
Taxcalculation
(0.05*50,000)+(0.10*50,000)+(0.15*75,000)=18,750
The"effectiverate"wouldbe10.7%:
18,750/175,000=0.107
The"marginalrate"wouldbe15%.

Seealso
12monthrule
Advancetaxruling
Confiscation
Excessburdenoftaxation
Fiscalincidence
Governmentbudgetbalance
Internationaltaxation
Listoftaxes
Modelaudit

Priceceiling
Pricefloor
Revolutionarytax
Taxcompetition
Taxexporting
Taxhaven
Taxresistance
Taxshelter
Taxpayerreceipt

Bycountryorregion
Listofcountriesbytaxrates
ListofcountriesbytaxrevenueaspercentageofGDP
Category:Taxationbycountry

Notes
1. CharlesE.McLure,Jr."Taxation"(http://www.britannica.com/EBchecked/topic/584578/taxation).
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1. CharlesE.McLure,Jr."Taxation"(http://www.britannica.com/EBchecked/topic/584578/taxation).
Britannica.Retrieved3March2015.
2. "20132014TheworldwidepersonaltaxguideUnitedArabEmirates"
(http://www.ey.com/GL/en/Services/Tax/TheworldwidepersonaltaxguideXMLQS?
preview&XmlUrl=/ec1mages/taxguides/TGE2013/TGEAE.xml).Ernst&Young.Retrieved3March2015.
3. Seeforexample26U.S.C.7203(http://www.law.cornell.edu/uscode/26/7203.html)inthecaseofU.S.
Federaltaxes.
4. Simkovic,Michael."DistortionaryTaxationofHumanCapitalAcquisitionCosts"
(http://ssrn.com/abstract=2551567).SocialScienceResearchNetwork.
5. "DefinitionofTaxes(NotebytheChairman),1996"(http://www.oecd.org/daf/mai/pdf/eg2/eg2963e.pdf)
(PDF).Retrieved20130122.
6. "SocialSecurityProgramsThroughouttheWorldontheU.S.SocialSecuritywebsiteforlinkstoindividual
countryprogramdescriptions"(http://www.ssa.gov/policy/docs/progdesc/index.html).Ssa.gov.Retrieved
20130122.
7. Bycontrast,somecountries,suchasNewZealand(http://www.ssa.gov/policy/docs/progdesc/ssptw/2010
2011/asia/newzealand.html),financetheprogramsthroughothertaxes.
8. See,e.g.,IndiaSocialSecurityoverview(http://labour.nic.in/ss/overview.html)
9. See,e.g.,UnitedStatesFederalUnemploymentTaxAct.
10. Taxesonthenetwealthofcorporationsareoftenreferredtoascorporatetax.
11. McCluskey,WilliamJ.Franzsen,RilC.D.(2005).LandValueTaxation:AnAppliedAnalysis
(http://books.google.com/?
id=jkogP2U4k0AC&pg=PA73&lpg=PA73&dq=disadvantages+of+land+value+taxation).AshgatePublishing,
Ltd.p.4.ISBN0754614905.
12. "TPCTaxTopics|FederalBudget"(http://www.taxpolicycenter.org/taxtopics/budget.cfm).
Taxpolicycenter.org.Retrieved20090327.
13. "26USC877"(http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000877000.html).
Law.cornell.edu.Retrieved20130122.
14. AlthoughTexashasnoindividualincometax,thestatedoesimposeafranchisetaxsoontobereplacedbya
margintaxonbusinessactivitythat,whilenotdenominatedasanincometax,isinsubstanceakindof
incometax.
15. "Economist.com"(http://www.economist.com/business/displaystory.cfm?story_id=13110436).
Economist.com.20090212.Retrieved20090327.
16. Quick,JohnGarran,Robert(1January1901).TheAnnotatedConstitutionoftheAustralianCommonwealth
(https://books.google.com/books?id=VRCAAAAIAAJ).Australia:Angus&Robertson.p.837.Retrieved
12March2015.
17. "TaxFacts|TaxFactsListing"(http://www.taxpolicycenter.org/TaxFacts/listdocs.cfm?topic2id=60).
Taxpolicycenter.org.Retrieved20090327.
18. "InternalRevenueService"
(http://web.archive.org/web/20070816190910/http://www.irs.gov/app/understandingTaxes/jsp/whys/lp/IWT5L
1lp.jsp).webcache.googleusercontent.com.Retrieved20090327.
19. "luxurytaxBritannicaOnlineEncyclopedia"(http://concise.britannica.com/ebc/article9370763/luxury
tax).Concise.britannica.com.Retrieved20090327.
20. http://links.jstor.org/sici?sici=00028282(196909)59%3A4%3C596%3ACEASTR%3E2.0.CO%3B23
21. A.B.Atkinson,OptimalTaxationandtheDirectVersusIndirectTaxControversy,10Can.J.Econ.590,592
(1977)
22. "WhatisDifferenceBetweenDirectandIndirectTax?"(http://www.investorguide.com/iguarticle1138tax
basicswhatisdifferencebetweendirectandindirecttax.html).InvestorGuide.Retrieved20111028.
23. "Taxesversusfees"
(http://www.ncsu.edu/project/calscommblogs/economic/archives/2007/05/the_difference.html).Ncsu.edu.
20070502.Retrieved20130122.
24. Someeconomistsholdthattheinflationtaxaffectsthelowerandmiddleclassesmorethantherich,asthey
holdalargerfractionoftheirincomeincash,theyaremuchlesslikelytoreceivethenewlycreatedmonies
beforethemarkethasadjustedwithinflatedprices,andmoreoftenhavefixedincomes,wagesorpensions.
Somearguethatinflationisaregressiveconsumptiontax.AlsoseeAndrsErosaandGustavoVentura,"On
inflationasaregressiveconsumptiontax
(http://www.ssc.uwo.ca/economics/econref/workingpapers/researchreports/wp2000/wp2000_1.pdf)".Some
claimtherearesystemiceffectsofanexpansionarymonetarypolicy,whicharealsodefinitivelytaxing,
imposingafinancialchargeonsomeasaresultofthepolicy.Becausetheeffectsofmonetaryexpansionor
counterfeitingareneveruniformoveranentireeconomy,thepolicyinfluencescapitaltransfersinthemarket,

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counterfeitingareneveruniformoveranentireeconomy,thepolicyinfluencescapitaltransfersinthemarket,
creatingeconomicbubbleswherethenewmoniesarefirstintroduced.Economicbubblesincreasemarket
instability,andthereforeincreaseinvestmentrisk,creatingtheconditionscommontoarecession.This
particulartaxcanbeunderstoodtobeleviedonfuturegenerationsthatwouldhavebenefitedfromeconomic
growth,andithasa100%transfercost(solongaspeoplearenotactingagainsttheirinterests,increased
uncertaintybenefitsnoone).OneexampleofastrongsupporterofthistaxwastheformerFederalReserve
chairBeardsleyRuml.
25. See,e.g.,Reinhart,CarmenM.andRogoff,KennethS.,ThisTimeisDifferent.PrincetonandOxford:
PrincetonUniversityPress,2008(p.143),TheLiquidationofGovernmentDebt,Reinhart,CarmenM.&
Sbrancia,M.Belen,p.19(https://www.imf.org/external/np/seminars/eng/2011/res2/pdf/crbs.pdf),
Giovannini,AlbertoanddeMelo,Martha,GovernmentRevenuefromFinancialRepression.TheAmerican
EconomicReview,Vol.83,No.4Sep.1993(pp.953963).
26. TaxesintheAncientWorld(http://www.upenn.edu/almanac/v48/n28/AncientTaxes.html),Universityof
PennsylvaniaAlmanac,Vol.48,No.28,April2,2002
27. DavidF.Burg(2004).AWorldHistoryofTaxRebellions(http://books.google.co.uk/books?
id=T91k6HAODzAC&lpg=PP1&pg=PP1#v=onepage&q&f=false).pp.viviii.ISBN9780415924986.
28. Olmert,Michael(1996).Milton'sTeethandOvid'sUmbrella:Curiouser&CuriouserAdventuresinHistory,
p.41.Simon&Schuster,NewYork.ISBN0684801647.
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20130122.
31. "HistoryOfIran(Persia)"(http://www.historyworld.net/wrldhis/PlainTextHistories.asp?historyid=aa65).
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14501789,p.238.
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collectionCode=CFR&searchPath=Title+26%2FChapter+I&granuleId=CFR2012title26vol1toc
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JDc_LrQfJ34C4Dg&redir_esc=y#v=onepage&q=Tony%20Crosland%20the%20capacity%20to%20tax%20inc
ome%20from%20capital%20is%20a%20mixed%20economy%20Marxist%20arguments%20public%20owners
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Furtherreading
Mytaxesgowhere?Howcountriesspendyourmoney
(http://www.bbc.com/capital/story/20150216mytaxesgowhere?
ocid=global_bbccom_email_19022015_capital)(17February2015),TheBBC
Minarik,JosephJ.(2008)."Taxation"(http://www.econlib.org/library/Enc/Taxation.html).In
DavidR.Henderson(ed.).ConciseEncyclopediaofEconomics(2nded.).LibraryofEconomics
andLiberty.ISBN9780865976658.OCLC237794267
(https://www.worldcat.org/oclc/237794267).

Externallinks
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