GOVERNMENT REVENUES (TAXATION and NON ± TAX REVENUES

)

The primary goal of a national tax system is to generate revenues to pay the expenditures of government at all levels. Because public expenditures tend to grow at least as fast as the national product, taxes, as the main vehicle of government finance, should produce revenues that grow correspondingly. Income, sales, and valueadded taxes generally meet this criterion; property taxes and taxes on nonessential articles of mass consumption such as tobacco products and alcoholic beverages do not. Some economists propose tax policies to promote economic growth. They eschew measures hindering growth and emphasize measures stimulating it. This approach may imply a qualitative restructuring of the tax system (for example, the substitution of indirect taxes for direct taxes to some extent) or special tax advantages to stimulate saving, labor mobility, research and development, etc. Government revenue is revenue received by a government. Its opposite is government spending. Government revenue is an important part of fiscal policy. Government revenue includes all amounts of money received from sources outside the government entity. Large governments usually have an agency or department responsible for collecting government revenue from companies and individuals. Government revenue may also include reserve bank currency which is printed. This is recorded as an advance to the retail bank together with a corresponding currency in circulation expense entry. The income derives from the Official Cash rate payable by the retail banks for instruments such as 90 day bills. There is a question as to whether using generic business based accounting standards can give a fair and accurate picture of government accounts in that with a monetary policy statement to the reserve bank directing a positive inflation rate the expense provision for the return of currency to the reserve bank is largely symbolic in that to totally cancel the currency in circulation provision all currency would have to be returned to the reserve bank and cancelled. Non-tax revenue or non-tax receipts are government revenue is not generated from taxes. Examples include:

y

y y

y y y y

y y

y y

Aid from another level of government (intragovernmental aid) - for example, in the United States, federal grants may be considered non-tax revenue to the receiving states Aid from abroad (foreign aid) Tribute or indemnities paid by a weaker state to a stronger one, often as a condition of peace after suffering military defeat. The war reparations paid by the defeated Central Powers after the First World War offer a well-known example. Revenue from state-owned enterprises (for example, revenue from state-owned liquor stores) Revenue (including interest or profit) from investment funds (collective investment schemes), sovereign wealth funds, or endowments Revenues from sales of state assets Rents, concessions, and royalties collected by the state when it contracts out the right to profit from some good or service to a private corporation. An example are contracts for resource extraction (for such natural resources as minerals, timber, petroleum and natural gas, or marine resources) collected privately under license from state-owned lands Fines collected and assets forfeiture as a penalty. Examples include parking fines, court costs levied on criminal offenders Fees for the granting or issuance of permits or licenses. Examples include vehicle registration plate permits, vehicle registration fees, watercraft registration fees, building fees, driver's licenses, hunting and fishing licenses, fees for professional licensing, fees for visas or passports, fees for demolition, rezoning, and land grading (which causes silt), and sometimes for increasing stormwater runoff, destroying native vegetation, and cutting-down healthy trees. User fees collected in exchange for the use of many public services and facilities. Tolls charged for the use of toll roads are an example Donations and voluntary contributions to the state

1. TAXATION ± its concept, scope, nature, basis and theory
To tax (from the Latin taxo; "I estimate", which in turn is from tang ; "I touch") is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law. A tax may be defined as a "pecuniary burden laid upon individuals or property owners to support the government [«] a payment exacted by legislative authority."[1] A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution

the Persian system of taxation was tailored to each Satrapy (the area ruled by a Satrap or provincial governor). collecting tax revenues from the people.g.[11] Records from the time document that the pharaoh would conduct a biennial tour of the kingdom. a system of raising revenue. For example. From the view of economists. contributions to public universities and museums). it states "But when the crop comes in. gabel. The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children. also.. through voluntary gifts (e. supply. At differing times there were between 20 and 30 Satrapies in the Empire and each was assessed according to its supposed productivity. and by confiscating wealth. by imposing penalties (e. yet compulsory transfer of resources from the private to the public sector levied on a basis of predetermined criteria and without reference to specific benefit received. impost. by borrowing. providing a portion to the Pharaoh. or other name. or of imposing taxes. subsidy. Governments also obtain resources by creating money (e. The first known system of taxation was in Ancient Egypt around 3000 BC 2800 BC in the first dynasty of the Old Kingdom. It was the responsibility of the Satrap to collect the due amount and to send it to the emperor. TAXATION The act of laying a tax. In Genesis (chapter 47. Examples include tuition at public universities and fees for utilities provided by local governments.. tillage. a tax is a non-penal. or on the members of a corporation or company." The legal definition and the economic definition of taxes differ in that economists do not consider many transfers to governments to be taxes. Other records are granary receipts on limestone flakes and papyrus. the raising of revenue. give a fifth of it to Pharaoh.g.g.the New International Version). by government. duty. some transfers to the public sector are comparable to prices." Joseph was telling the people of Egypt how to divide their crop. after deducting his expenses (The expenses and the power of deciding precisely how and from whom to raise the money in the province.. excise. traffic fines). custom. in the Persian Empire. by the proper authority. verse 24 . as on the subjects of a state. printing bills and minting coins).[12] Early taxation is also described in the Bible. a regulated and sustainable tax system was introduced by Darius I the Great in 500 BC[13]. aid. Later. tribute. offer maximum opportunity . A share (20%) of the crop was the tax.imposed by government [«] whether under the name of toll.

Redistribution. Egypt was known for the wealth of its crops. Territorial in operation 5.) The quantities demanded from the various provinces gave a vivid picture of their economic potential. Several studies have shown that direct taxation (such as income taxes) generates the greatest degree of accountability and better governance. it was to be the granary of the Persian Empire (as later of Rome's) and was required to provide 120. was already fabled for its gold. Nature of taxation 1. A third purpose of taxation is reprising. Legislative in nature 3. This is the most widely known function. four months supply of food for the army. A fourth. Strongest among the inherent power of the state 7. Exemption of the government 6. India clearly. Taxes are levied to address externalities: tobacco is taxed. while indirect taxation tends to have smaller effects. The American revolutionary slogan "no taxation without representation" implied this: ruler¶s tax citizens and citizens demand accountability from their rulers as the other part of this bargain. Babylon was assessed for the highest amount and for a startling mixture of commodities . Reprising.000 measures of grain in addition to 700 talents of silver. and Representation. Persians and Medes paid no tax. The main purpose is revenue: taxes raise money to spend on armies. Inherent power of sovereignty 2. Normally. to discourage smoking and many people] advocate policies such as implementing a carbon tax.for rich pickings. roads. this means transferring wealth from the richer sections of society to poorer sections. consequential effect of taxation in its historical setting has been representation. but.1000 silver talents. For instance. Subject of constitutional and inherent . for example. This was exclusively a tax levied on subject peoples. Public purpose 4. Taxation has four main purposes or effects: Revenue. A second is redistribution. schools and hospitals. the province was to supply gold dust equal in value to the very large amount of 4680 silver talents. they were liable at any time to serve in the army. and on more indirect government functions like market regulation or legal systems.

income tax is "direct". Taxes are sometimes referred to as direct taxes or indirect taxes. According to this definition. Thus.. and proportional are used to describe the way the rate progresses from low to high. inheritance taxes. service. for example. or proportionally." (A. the terms may have different meanings. which can be applied to any type of tax system (income or consumption) that meets the definition. The opposite of a progressive tax is a regressive tax. In U. Econ. The terms can also be used to apply meaning to the taxation of select consumption. whereas the tax on simply owning the property itself would be a direct tax. In law. The terms describe a distribution effect. J. Kinds of taxes  Ad valorem An ad valorem tax is one where the tax base is the value of a good. 590. The terms progressive. An ad . property taxes. The distinction between direct and indirect taxation can be subtle.direct taxes may be adjusted to the individual characteristics of the taxpayer. Indirect taxes are imposed on events. from high to low. where the effective tax rate decreases as the amount to which the rate is applied increases.S. and value added taxes are different types of ad valorem tax. but can be important under the law. An economic definition. Sales taxes. and sales tax is "indirect". constitutional law. In between is a proportional tax. where the effective tax rate is fixed. Optimal Taxation and the Direct Versus Indirect Tax Controversy. which can sometimes lead to confusion. rights. states that ". or property. B.2. direct taxes refer to poll taxes and property taxes. The meaning of these terms can vary in different contexts. and activities. for instance. 592 (1977)). 10 Can. while the amount to which the rate is applied increases. tariffs. a tax on the sale of property would be considered an indirect tax. Atkinson. regressive. such as a tax on luxury goods and the exemption of basic necessities may be described as having progressive effects as it increases a tax burden on high end consumption and decreases a tax burden on low end consumption.. Importance. A progressive tax is a tax imposed so that the effective tax rate increases as the amount to which the rate is applied increases. concept and kinds of taxes An important feature of tax systems is the percentage of the tax burden as it relates to income or consumption. whereas indirect taxes are levied on transactions irrespective of the circumstances of buyer or seller. privileges. by Atkinson. which are based on simple existence or ownership.

in an inflationary environment.  Corporation tax Corporate tax refers to a direct tax levied by various jurisdictions on the profits made by companies or associations and often includes capital gains of a company. One of the earliest modern uses of the term "bank tax" occurred in the context of the Financial crisis of 2007±2010. Earnings are generally considered gross revenue less expenses. a tax is collected on the sale of alcoholic drinks that is calculated by volume and beverage type. while a corporate sports car is only partly . For example. In many cases. rather than the price of the drink. and can be implemented by means of a sales tax or by modifying an income tax to allow for unlimited deductions for investment or savings. then selling an asset for twice the price it was purchased for five years earlier represents no gain at all.valorem tax is typically imposed at the time of a transaction (sales tax or value added tax (VAT)) but it may be imposed on an annual basis (property tax) or in connection with another significant event (inheritance tax or tariffs). Partly to compensate for such changes in the value of money over time.  Consumption tax A consumption tax is a tax on non-investment spending. capital gains may be to some extent illusory: if prices in general have doubled in five years.  Bank tax A bank tax ("bank levy") is a proposed tax on banks. Corporate expenses that relate to capital expenditures are usually deducted in full (for example. regardless of its price. An alternative to ad valorem taxation is an excise tax. However. such as the United States. some jurisdictions. give a favorable capital gains tax rate based on the length of holding. the amount of a capital gain is treated as income and subject to the marginal rate of income tax. where the tax base is the quantity of something.  Capital gains tax A capital gains tax is the tax levied on the profit released upon the sale of a capital asset. trucks are fully deductible in the Canadian tax system. in the United Kingdom.

deductible).  Currency transaction tax A currency transaction tax is a tax placed on a specific type of currency transaction for a specific purpose. gallon. in the United States.  Environment Affecting Tax This includes natural resources consumption tax. giving rise to book-tax differences. a blank media tax is a tax on recordable media such as CD-Rs. not the value. a fuel excise (use tax) is often used to pay for public transportation. For example. which are carried on the balance sheet. which then creates deferred tax assets and liabilities for the corporation. If the book-tax difference is carried over more than a year. a . There are several types of currency transaction taxes that have been proposed. accounting rules about deductible expenses and tax rules about deductible expense will differ at times. whose proceeds are typically allocated to copyright holders. the most prominent being the Tobin tax and the Spahn tax. gallon (4. Critics charge that such taxes blindly tax those who make legitimate and illegitimate usages of the products. an excise is not a function of the value of the product being taxed. especially roads and bridges and for the protection of the environment.S. The stated purpose is to reduce the environmental impact by reprising. Notably. the Federal government imposes an excise tax of 18. For example. This term has been most commonly associated with the financial sector.S. and others. They are often deducted over the useful life of the asset purchase. A special form of hypothecation arises where an excise is used to compensate a party to a transaction for alleged uncontrollable abuse. Greenhouse gas tax (Carbon tax). of product purchased. Most remain unimplemented concepts. while state governments levy an additional 8 to 28 cents per U. as opposed to consumption taxes paid by consumers.86¢/L) of gasoline. "sulfuric tax". Excise taxes are based on the quantity.4 cents per U. Excises on particular commodities are frequently hypothecated. for example. it is referred to as a temporary difference.  Excises Unlike an ad valorem. for instance.

Under the new law. The object is to reduce the release of carbon into the atmosphere. relative to other goods.person or corporation using CD-R's for data archival should not have to subsidize the producers of popular music. diesel-fuel.[ Second. and natural gas. is a financial transaction tax. This may be combined with hypothecation if the proceeds are then used to pay for the costs of treating illness caused by alcohol abuse. The third.  Financial activities tax As a regulatory response and proposal to the financial crisis of 2007-2010. the IMF proposed three types of global taxes on banks: First. In the United Kingdom. pornography. . Similar taxes may exist on tobacco. which was not endorsed by the IMF. A carbon tax is a tax on the consumption of carbonbased non-renewable fuels.  Expatriation Tax An Expatriation Tax is a tax on some who renounce their citizenship of some governments. For example. passed by the Republican-controlled government. The most significant Expatriation Tax is one found in the USA. amended section 877 of the Internal Revenue Code of the USA. any individual who has a net worth of $2 million or an average income-tax liability of $127. The American Jobs Creation act of 2004. and they may be collectively referred to as "sin taxes". Excises (or exemptions from them) are also used to modify consumption patterns (social engineering).. such as petrol. this would eventually be refined so that riskier businesses paid more. a high excise is used to discourage alcohol consumption. vehicle excise duty is an annual tax on vehicle ownership. It would initially be at a flat rate. etc.000 who renounces his or her citizenship and leaves the country is automatically assumed to have done so for tax avoidance reasons and is victim to severe tax laws. but not ruled out as administratively difficult. jet fuels. the "Financial Activities Tax" aims directly at excess bank profit and pay. the "Financial Stability Contribution" is a straight tax on a bank's gross profits²before deducting compensation. on April 16. 2010.

it is often called a corporate tax.g. The "tax net" refers to the types of payment that are taxed. and business income. Capital gains may be taxed when realized (e. The rates for different types of income may vary and some may not be taxed at all. as opposed to consumption taxes paid by consumers. Some types of income. with small corrections made soon after the end of the tax year.g. for . in others.  Income tax An income tax is a tax levied on the financial income of persons. whereas some are multinational. proportional. such as interest on bank savings. In some tax systems. or regressive. when shares appreciate in value). There are several types of financial transaction taxes. expenses. they may be defined broadly to include windfalls (e. or corporation tax. while corporate income taxes often tax net income (the difference between gross receipts. Each has its own purpose. when shares are sold) or when incurred (e.g. Transaction tax A financial transaction tax is a tax placed on a specific type (or types) of financial transaction for a specific purpose (or purposes). or investment is required (e. Income taxation can be progressive. Individual income taxes often tax the total income of the individual (with some deductions permitted). These corrections take one of two forms: payments to the government. Concepts are found in various organizations and regions around the world. may be considered as personal earnings (similar to wages) or as a realized property gain (similar to selling shares). or other legal entities. Some are domestic and meant to be used within one nation. which included personal earnings (wages). Business income may only be taxed if it is significant or based on the manner in which it is paid. and additional write-offs). This term has been most commonly associated with the financial sector. personal earnings may be strictly defined where labor. with varying degrees of tax incidence. Various income tax systems exist. Some have already been implemented.g. and some remain unimplemented concepts. corporate income tax. Personal income tax is often collected on a pay-as-you-earn basis. corporations. gambling wins). wages). When the tax is levied on the income of companies. skill. capital gains.

while the latter taxes the beneficiaries of the estate.  Inheritance tax Inheritance tax. Poll taxes are administratively cheap because they are easy to compute and collect and difficult to cheat. Economists have considered poll taxes economically efficient because people are presumed to be in fixed supply. which acts as a hidden tax that subtracts value from those assets. However. Some argue that inflation is a regressive consumption tax. and more often have fixed incomes. For example. a loss on the stock market may be deducted against taxes paid on wages.taxpayers who have not paid enough during the tax year. and tax refunds from the government for those who have overpaid. they are much less likely to receive the newly created monies before the market has adjusted with inflated prices. 30:11-16) was a form of poll tax. this distinction does not apply in other jurisdictions.  Inflation tax An inflation tax is the economic disadvantage suffered by holders of cash and cash equivalents in one denomination of currency due to the effects of Expansionary monetary policy. for example. there is a distinction between an estate tax and an inheritance tax: the former taxes the personal representatives of the deceased.  Poll tax A poll tax. One of the earliest taxes mentioned in the Bible of a half-shekel per annum from each adult Jew (Ex. or capitation tax. Many economists hold that the inflation tax affects the lower and middle classes more than the rich. and death tax or duty are the names given to various taxes which arise on the death of an individual. if using this terminology UK inheritance tax would be an estate tax. is a tax that levies a set amount per individual. wages or pensions. It is an example of the concept of fixed tax. also called a per capita tax. such that business losses can only be deducted against business tax by carrying forward the loss to later tax years. However. They may allow losses from one type of income to be counted against another. Other tax systems may isolate the loss. Income tax systems will often have deductions available that lessen the total tax liability by reducing total taxable income. estate tax. In United States tax law. as they hold a larger fraction of their income in cash. poll taxes are very unpopular because poorer people pay a .

Property tax can be defined as "generally. Real estate or realty is the combination of land and improvements to land.[25] The introduction of a poll tax in medieval England was the primary cause of the 1381 Peasants' Revolt. but more popularly referred to as the Poll Tax). distort market mechanisms or otherwise create deadweight losses the way other taxes do. yearly). which is imposed in many countries on the estates of the deceased.  Property tax A property tax is a tax put on property by reason of its ownership. couples will choose to have fewer children if a poll tax is imposed. a land value tax is levied only on the unimproved value of the land ("land" in this instance may mean either the economic term." There are three species of property: land.e.g. with the result that one can still see listed buildings with windows bricked up in order to save their owners money. with similar results. The change from a progressive local taxation based on property values to a single-rate form of taxation regardless of ability to pay (the Community Charge. For a period of over 150 years from 1695 a window tax was levied in England. e. or the natural resources associated with specific areas of the Earth's surface: "lots" or "land parcels"). charged upon change of ownership. improvements to land (immovable man-made things. tax imposed by municipalities upon owners of property within their jurisdiction based on the value of such property. and inheritance tax. Property taxes are usually charged on a recurrent basis (e. In addition. In contrast with a tax on real estate (land and buildings). all natural resources. where the tax base is the estimated value of the property. A similar tax on hearths existed in France and elsewhere. the supply of people is in fact not fixed over time: on average... Proponents of land value tax argue that it is economically justified. i.g. known colloquially as the 'Poll Tax riots'. led to widespread refusal to pay and to incidents of civil unrest. as it will not deter production.higher proportion of their income than richer people. A common type of property tax is an annual charge on the ownership of real estate. Scotland was the first to be used to test the new poll tax in 1989 with England and Wales in 1990. . The two most common types of event driven property taxes are stamp duty. buildings) and personal property (movable things).

e. Tariffs discourage trade. These often differ from comprehensive income taxes in that they are levied only on specific sources of income. which provide income to retired workers. the taxing authority may receive a payment in lieu of taxes to compensate it for some or all of the foregone tax revenue. People with higher incomes spend a lower proportion of them. This is the classic "You pay for what you spend" tax.  Tariffs An import or export tariff (also called customs duty or impost) is a charge for the movement of goods through a political border. utilities and other necessities from sales taxes. and they may be used by governments to protect domestic industries. fund those systems with specific dedicated taxes. A proportion of tariff revenues is often hypothecated to pay government to maintain a navy or border police. so a flat-rate sales tax will tend to be regressive. since poor people spend a higher proportion of their incomes on these commodities.When real estate is held by a higher government unit or some other entity not subject to taxation by the local government.  Retirement tax Some countries with social security systems. It is therefore common to exempt food.  Sales tax Sales taxes are levied when a commodity is sold to its final consumer. and the National Insurance Contributions (NICs) collected from employers and employees in the United Kingdom to fund the country's national insurance system. generally wages and salary (in which case they are called payroll taxes). A further difference is that the total amount of the taxes paid by or on behalf of a worker is typically considered in the calculation of the retirement benefits to which that worker is entitled. as only those who spend money on non-exempt (i. The question of whether they are generally progressive or regressive is a subject of much current debate. Retail organizations contend that such taxes discourage retail sales. luxury) items pay the tax. so such exemptions would make the tax more progressive. a payroll tax that is collected from employers and employees in the United States to fund the country's Social Security system. The classic ways . Examples of retirement taxes include the FICA tax.

possibly graduated for vehicle type. tunnel. Stamp duty has the effect of discouraging speculative purchases of assets by decreasing liquidity. Shunpiking is the practice of finding another route to avoid payment of tolls. the participating countries share the revenues from tariffs on goods entering the customs union. Its modern derivatives. and possibly to impose protective tariffs on imports from outside the bloc. In most countries the stamp has been abolished but stamp duty remains.  Transfer tax Historically. investment policy.  Toll A toll is a tax or fee charged to travel via a road. Tax. in many countries. and certain partnership transactions. Stamp duty is levied in the UK on the purchase of shares and securities. A trade bloc is a group of allied countries agreeing to minimize or eliminate tariffs against trade with each other. canal. and agricultural policy. In the United States transfer tax is often charged by the state or local government and (in the case of real property transfers) can be tied to the recording of the deed or other transfer documents. waterway or other transportation facilities. and. are respectively charged on transactions involving securities and land. informal shunpiking by individuals escalated into a form of boycott by regular users. The toll is likely to be a fixed charge. the issue of bearer instruments. In some situations where tolls were increased or felt to be unreasonably high. bridge. road and tunnel projects. a contract needed to have a stamp affixed to make it valid. stamp duty reserve tax and stamp duty land tax. . They have also been used in privately constructed transport links. A customs union has a common external tariff.of cheating a tariff are smuggling or declaring a false value of goods. or for distance on long routes. according to an agreed formula. Historically tolls have been used to pay for public bridge. The charge for the stamp was either a fixed amount or a percentage of the value of the transaction. with the goal of applying the financial stress of lost toll revenue to the authority determining the levy. tariff and trade rules in modern times are usually set together because of their common impact on industrial policy.

S. seem to be intended to prevent interference by the states with freedom of commercial intercourse. but remitting only the amount related to the distribution mark-up to the government. the total tax paid is the same. nevertheless it is specifically provided that "No state shall without the consent of the Congress lay any imposts or duties on imports or exports. remitting that amount to the government. Single Business Tax. To give an example. the federal constitution contains some specific limitations on the state taxing power. The tax is in place for both "natural" and in some cases legal "persons". imposts. The last VAT amount is paid by the eventual retail customer who cannot recover any of the previously paid VAT. and from that exact a tax on net worth (assets minus liabilities). except what may be absolutely necessary for executing its inspection laws" and that "No state shall without the consent of Congress lay any duty of tonnage" These restrictions. or Turnover Tax in some countries. but by the federal constitution authority to raise taxes by this method is specifically conferred on the federal government and while this does not in itself exclude the exercise of like power by the states. Limitation on the power of taxation Aside from the general limitations resulting from the requirements of due process of law and equal protection of the laws.T). 3. charging the retail distributor the VAT on the entire price to the retailer. but it is paid at differing points in the process. applies the equivalent of a sales tax to every operation that creates value. The laying and collection of duties. sheet steel is imported by a machine manufacturer. The manufacturer will then transform the steel into a machine.  Wealth (net worth) tax Some countries' governments will require declaration of the tax payers' balance sheet (assets and liabilities). The wholesale distributor will then continue the process. Value Added Tax / Goods and Services Tax A value added tax (VAT). For a VAT and sales tax of identical rates. as a percentage of the net worth. . and excises is a legitimate method of exercising the power of taxation. or a percentage of the net worth exceeding a certain level. The manufacturer will collect the VAT on the higher price. while they relate specifically to the state power to tax. also known as 'Goods and Services Tax' (G. but will remit to the government only the excess related to the "value added" (the price over the cost of the sheet steel). That manufacturer will pay the VAT on the purchase price. selling the machine for a higher price to a wholesale distributor.

and of seizure and sale to enforce such payment. if the tax becomes delinquent. the tonnage tax prohibited being considered to be a tax on boats and vessels based upon their capacity rather than their value. But there must be a procedure of some kind to fix the valuation of the property for the purposes of taxation. The 1987 Philippine Constitution sets limitations on the exercise of the power to tax. and of state taxes on boats and vessels. but the matter is not of sufficient general importance to justify further elaboration. All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. shall be transferred to the general funds of the Government. are themselves due process of law. and the . The Congress shall evolve a progressive system of taxation. The rule of taxation shall be uniform and equitable.The provision that Congress shall have power " To regulate commerce with foreign nations and among the several states and with the Indian tribes" has been interpreted also as restricting the levying of state taxes on foreign or interstate commerce. The validity of state inspection laws. The 1987 Philippine Constitution sets limitations on the exercise of the power to tax. has been the subject of some discussion. It is sufficient to say that few attempts have been made by the states to impose taxes for the enforcement of state inspection. and that taxes on boats and vessels have been sustained where they are reasonably calculated to reach the value of the property itself. The usual method of assessment and levy for the purpose of determining the amount of tax to be paid. if any. If the purpose for which a special fund was created has been fulfilled or abandoned. The rule of taxation shall be uniform and equitable. and some apportionment of taxes on the basis of such valuation. The Congress shall evolve a progressive system of taxation. 4. the balance. The extent to which this clause restricts state taxation will be considered in the chapter relating to the regulation of commerce. so far as it is within the jurisdiction of the states. Legal Process of Taxation The requirement of due process of law does not necessitate judicial proceedings to determine the amount of tax to be paid by each person and to enforce the tax as against his property.

the taxpayer is entitled to some specific notice of the proceeding in which it is to be determined whether he or his property is within the class subject to the tax. and following the assessment there is usually a levy made by some proper board or tribunal which determines the amount which each property owner must pay in order that the desired aggregate sum of public money shall be raised. The ordinary public taxes which are based on property owned are usually apportioned by means of an assessment of the value of the property. and of the amount which he is required to pay. Absolute uniformity is impracticable and it would be equally inexpedient. and the distinctions thus attempted would be invalid. But if the lands of non-residents are taxed on a higher valuation. and the taxpayer is bound to ascertain the sum required of him and pay it within the time required by the general statutes. so that he shall have opportunity to make payment. or if some persons are required to pay a higher charge for the privilege of pursuing a particular occupation than other persons. The principle of uniformity requires some correspondence between burdens and benefits. The general advantages of government as to the protection of persons and property constitute all the benefits necessary to sustain a general tax applicable to persons and property within the jurisdiction of the state. in its discretion. but he may by judicial proceedings question the validity of the tax sought to be exacted. and different classes of persons may be required to contribute to the maintenance of government in different ways. for determining the amount belonging to each taxpayer. though they may result in some measure of inequality. Due Process of Law As To Taxation. made by proper officers. As to the general public taxes which are levied in accordance with law on assessments regularly provided for. The legislative power may. the uniform operation of the law required by the Fourteenth Amendment is denied. Different classes of property may be taxed in different methods. or at a higher rate than the lands of residents. but as to special taxes for public improvements and the like. and as long as the classifications made are reasonable and general. On failure to pay either a general or a special tax. the law itself constitutes sufficient notice. adjust the burdens of government so as to make them fall in some measure in accordance with the benefits resulting and the protection afforded. but as to municipal taxes and .taxpayer must have some kind of notice to enable him to pay before his property is seized. the property of the taxpayer may be seized and sold. they will not be objectionable. Rule Of Uniformity The very nature of the power to raise money by means of taxation involves the idea of an apportionment of the burden in accordance with some principle of uniformity.

saying that "the evident justice and utility of (these) maxims have recommended them more or less to the attention of all nations. IV. but if it is attempted to bring within the municipal limits agricultural land. which is not in any way benefited by the municipal government. Certainty. in proportion to their respective abilities. ought all to be clear and plain to the contributor. the question may sometimes be raised whether the person or property taxed is within the benefit of the tax in such sense as to authorize its imposition. (See Kelly v. Pittsburgh) 5. If we measure our existing tax systems against these four maxims arid according to these criteria. These four maxims have been summarized in four words: Equity. Smith¶s Principles of Ideal Tax System Adam Smith is generally considered (certainly in the English speaking world) to be the father of modern political economy. and his property does not belong to the class of property. Not only does the government have to employ armies of inspectors and . Convenience and Efficiency.special taxes for improvements. or in the manner. The maxims were as follows:I. and to every other person. the quantity to be paid. of taxation. as nearly as possible. that is. the manner of payment. Thus general municipal taxes may properly be laid on all property within the municipal limits. Every tax ought to be contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state. Maxim IV provides grounds alone for condemning our tax systems on the grounds of efficiency. it may well be said that the owner of such property does not belong to the class of persons. III. II. Every tax ought to be levied at the time. we can see just how far they fall short of the ideal. and not arbitrary. The time of payment. The subjects of every state ought to contribute towards the support of the government. which can properly be subjected to such taxes. In "The Wealth of Nations" he set forth four maxims. or canons. and that the tax is not therefore levied according to the principle of uniformity. in proportion to the revenue which they respectively enjoy under the protection of the state. The tax which each individual is bound to pay ought to be certain. in which it is most likely to be convenient for the contributor to pay it.

advisors.to engage teams of tax managers. the term "Revenue" only covered income from an investment and did not include wages and salaries. for example. in the context of their time.to stay competitive he must take full advantage of the tax system -. and we are all the worse for it. Maxim II makes it clear that the requirement of certainty means certain to the man in the street -. accountants and lawyers at his own expense. Does it. It appears to be justifying the "ability to pay" principle. and distorts it. it is clear that he considered that under Maxim I taxation should be levied mainly on economic rent (the rental value of land in its unimproved state -. It is the most controversial. not just to the "tax profession". but universally ignored. Certainly. To look at tax in these terms is. I have deliberately left to the last. it is merely expropriating existing wealth. a society's tax system must be known and understood by all its adult members. Upon a more detailed consideration of Smith's maxims. and in eighteenth century Britain most investment was in . There is a danger in interpreting Smith outside the context of the society in which he lived and about which he wrote. otherwise. In Smith's day.as if this gives the government carte blanche to do what it likes.to all of us. Maxim I. If any society is to cohere. they cannot play their part to the full.ground rent). The costs of all these people mean that there is a large difference between the revenue to the government (net of administration expenses) and the total outlay by the taxpayer. its members must know and be capable of understanding their basic rights under the society's constitution.assessors. Likewise. as Henry George pointed out. Taxation falls on and necessarily affects. they are two sides of the same coin. Maxim III is self-explanatory. but whoever heard of taxing people according to inability to pay? In fact the ability to pay principle gets us no further forward. the poor taxpayer is forced by economic circumstances -. investigators. require a proportional income tax or a progressive income tax? Levying a tax on existing riches according to their amount is not taxing someone according to his ability. prosecutors and other officials (including judges). to fail to see that production and distribution are inseparable. It is somehow presumed that inconvenience in payment is legitimized by the fact that the government is democratically accountable . Taxing someone truly according to their "ability" requires taxing them according not to the income or wealth which they do in fact enjoy but according to the income or wealth which they have the capability of enjoying. "Rent" and "Revenue" were virtually synonymous. future production and distribution.

financial investment in assets represented on paper. but really a tax on economic rent. new education and training increasing the skills of the (potential) labour force which can increase earnings from work. The definition of capital accumulation is subject to controversy and ambiguities.landed property. capital accumulation involves both a net addition and a redistribution of wealth. rent.. because it could refer to a net addition to existing wealth. since additional production usually requires additional funds to enlarge the scale of production.e. "human capital accumulation. interest. So when Smith proposed in Maxim I a tax on the subjects of a state "in proportion to the revenue which they respectively enjoy under the protection of the stale". royalties.) 6. Non-financial and financial capital accumulation is usually needed for economic growth. Capital can be generally defined as assets invested with the expectation that their value will increase. or the creation of wealth. Most state expenditure at that time was on civil and national defense. capital gain or some other kind of return. Smarter and more productive organization of production can also . wealth is merely shifted from A to B. although the total stock of wealth of society decreases. usually because there is the expectation of profit. the accumulation of capital refers simply to the gathering or amassment of objects of value. Distribution of Income and Wealth and Economic Stability) Most generally. royalties. which may raise the question of who really benefits from it most Capital accumulation can refer variously to y y y y real investment in tangible means of production. Most often. fees or capital gains. which largely meant securing landowners in their privileged position." i. it is possible that a few people or organizations accumulate capital and grow richer. But if some accumulate capital only at the expense of others. This would be tax on private property in land according to its annual value. In principle. investment in non-productive physical assets such as residential real estate or works of art that appreciate in value. or to a redistribution of wealth. rent. If more wealth is produced than there was before. the increase in wealth. yielding profit. interest. the total stock of wealth increases. being the creation of and protected by the state. a society becomes richer. (A tax on economic rent is something to which I shall return later. he was not advocating the modern proportional or progressive income tax. Development Requirements (Capital Formation and Allocation.

that is. Classical economists such as Adam Smith. etc. According to this view. paraphrasing various statements by Oliver Wendell Holmes. etc.[31] A common presentation of this view. land. Income distribution has always been a central concern of economic theory and economic policy. In modern macroeconomics and econometrics the term capital formation is often used in preference to "accumulation". taxation in modern nation-states benefits the majority of the population and social development. The conservative position is encapsulated in perhaps the most famous adage of public finance. minerals. Additionally. the sale of property. Jr. discoveries of new assets (oil. Important theoretical and policy concerns include the relationship between income inequality and economic growth.[32] It can also be argued that in a democracy. is "Taxes are the price of civilization". An economy with frequent large recessions. progressive taxation can be used to reduce economic inequality in a society. or frequent financial crises would be considered economically unstable. "An old tax is a good tax". Modern economists have also addressed this issue.increase production without increased capital. the payment of taxation is justified as part of the general obligations of citizens to obey the law and support established institutions. 7.[34] Conservatives advocate the "fundamental conservative premise that no one should . society as a whole decides how the tax system should be organized. because the government is the party performing the act of imposing taxes. For traditional conservatives. Income distribution is how a nation¶s total economy is distributed amongst its population.). An economy with fairly constant output growth and low and stable inflation would be considered economically stable. very high or variable inflation. The American Revolution's "No taxation without representation" slogan implied this view. Thomas Malthus and David Ricardo were mainly concerned with factor income distribution. taxes are justified as they fund activities that are necessary and beneficial to society. Issues and Problems According to most political philosophies. but have been more concerned with the distribution of income across individuals and households. labor and capital. the distribution of income between the main factors of production. gold. a pronounced business cycle. Capital can be created without increased investment by inventions or improved organization that increase productivity. Economic stability refers to an absence of excessive fluctuations in the macro economy.

Defenders of business taxation argue that it is an efficient method of taxing income that ultimately flows to individuals.a.[35] As argued by Tony Crosland and others. mineral extraction.be excused from paying for government.) is unearned income. is often justified on grounds including territorial sovereignty. and the social contract. or that separate taxation of business is justified on the grounds that commercial activity necessarily involves use of publicly established and maintained economic infrastructure. If that same company also rented a portion of one of its buildings. Social democrats generally favor higher levels of taxation to fund public provision of a wide range of services such as universal health care and education. such as income tax. etc.k. the capacity to tax income from capital is a central element of the social democratic case for a mixed economy as against Marxist arguments for comprehensive public ownership of capital. . Compulsory taxation of individuals. and belongs to the community rather than any individual. as well as the provision of a range of welfare benefits. Large governments usually have an agency or department responsible for collecting government revenue from companies and individuals Other sources of government revenue (a. Georgist economists argue that all of the economic rent collected from natural resources (land.". fishing quotas. They advocate a high tax (the "Single Tax") on land and other natural resources to return 8. non-operating revenue) is revenue from peripheral (non-core) operations. Many libertarians recommend a minimal level of taxation in order to maximize the protection of liberty. a company that manufactures and sells automobiles would record the revenue from the sale of an automobile as "regular" revenue. For example. lest they come to believe that government is costless to them with the certain consequence that they will demand more government 'services'. and that businesses are in effect charged for this use. Other sources of Government Revenue Government revenue includes all amounts of money received from sources outside the government entity. it would record that revenue as ³other revenue´ and disclose it separately on its income statement to show that it is from something other than its core operations.

pearsonschool. pp.com/definition/taxation-principles. Economics: Principles in action. New Jersey 07458: Pearson Prentice Hall.com/index.cfm?locator=PSZ3R9&PMDbSiteId=2781&PMDbSoluti onId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4.wikipedia.org/wiki/Tax http://www. Steven M.wikipedia.jrank. 'How the IMF Promotes Global Economic Stability' ^Sullivan. 348.com/words/ta/taxation228398. Manual Velázquez. Essays in the Theory of Economic Growth. http://www.html#ixzz0sIFsxk5c Michel Aglietta.html . ISBN 0-13-063085-3.org/wiki/Non-tax_revenue http://en.businessdictionary.wikipedia. Upper Saddle River. Business Ethics: Concepts and Cases.org/pages/10695/Taxation-KindsTaxes. Joan Robinson.Kinds Of Taxes http://law.org/wiki/Government_revenue Taxation . Sheffrin (2003).REFERENCES http://en.html http://en. arthur. http://www. A Theory of Capitalist Regulation.brainyquote.

Sign up to vote on this title
UsefulNot useful