What is a Tax?

The items or services on which Tax is charged are decided by the Government of the country or the particular state. The rate by which Tax is charged is also decided by the Government and the rate may also vary for different goods so that different goods are having different rate of Tax.
If Tax Rate increases as the amount to which the Tax is applied increases than it is known as Progressive Tax Rate, if Tax Rate decreases as the amount to which the Tax is applied increases than it is known as Regressive Tax Rate and if the Tax Rate is constant or fixed and does not vary with an increase in the amount to which Tax is applied than it is known as Proportional Tax Rate.

The Tax collected from various sources is a source of revenue for the Government and it is than utilized for the purpose of development of the country through Expenditure on roads, Education system, Health care system, Pension for older people, in providing Unemployment benefits, public services like Transportation, Power, Water, Waste Management, Modernization of the State, Expenditure on Defense forces and many more.

There are different types of Taxes which are implemented by the Government on the Citizens like Income Tax, Consumption Tax, Capital Gains Tax, Advalorem Tax, Environment Affecting Tax, Excises Tax, Poll Tax, Retirement Tax, Property Tax, Inheritance Tax, Sales Tax, Toll Tax, Transfer Tax and many more. However their structure and Rate of Tax to be charged vary from country to country.

The Tax collected from various sources in a country has a major contribution in the GDP of the country. Tax collection from various companies also gives an indication of the health and growth of the company and in turn the country as a whole. The Tax collection in every country is generally performed by a Government Agency like Internal Revenue Services (IRS) in US, Her Majesty’s Revenue and Customs (HMRC) in UK, etc. It is the Duty of each and every citizen to pay Tax on time and those who fail to do so are punishable by law.