At what simple interest rate will a sum of money double in 20 years? (2023)

Let the initial amount of money invested be Rs. X
Then after 8 years the money had become 2x.
From Rs. 2x, the interest money will be 2x - initial amount invested = 2x - x = x.
The interest rate is r.

So now we're going to use a simple interest formula.
According to the Simple Interest (S.I) formula.
\[ \Rightarrow S.I. = \dfrac{{PRT}}{{100}}\]. where P is the principal amount, R is the interest rate, and T is the time period.

So put the values ​​in the above formula. we will get,
\[ \right arrow x = \dfrac{{xr(8)}}{{100}}\]
By solving the above equation. we will get,
\[ \Rightarrow {\text{ }}r{\text{ }} = {\text{ }}\dfrac{{100}}{8}{\text{ }} = {\text{ }}12,5\]

Therefore, the interest rate for doubling some money in 8 years is 12.5% ​​per year.

Note:- Whenever we encounter this type of issue where we are prompted to do
Finding the interest rate Next, we first find the interest on the principal amount
Subtract the principal from the money after 8 years and then we'll do it.
Assume that the interest rate is r, and then apply the simple interest formula and
Find the required value of the interest rate.

According to the question, SI must equal 2 × P for the grand total to be twice the original principal after 5 years.

\(\daher {\rm{P}} = {\rm{}}\frac{{{\rm{P}} \times {\rm{X}} \times 5}}{{100}}\)

⇒ X = 20 %

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Simple interest is a fixed interest rate applied to the principal amount. Simple interest is calculated only on the original amount/principal. Simply put, simple interest is calculated by taking the product of the principal and the interest rate x the period.

See Also: Greek Mythology Quiz

How does compound interest work?

Compound interest is the process of adding interest to principal. It is the result of reinvesting the interest you have earned. The more you reinvest, the more you earn. It is also the fastest way to grow your money. However, increasing their interest is not always a good idea.

Compound interest is calculated for each period based on the original principal plus any interest accrued in prior periods.

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A tax is a mandatory financial charge or other type of levy imposed on a taxpayer (individual or entity) by a government organization to finance government and various public expenditures (regional, local or national) and tax compliance refers to policies and behaviors aimed at ensuring that taxpayers pay the right amount of tax at the right time, and to ensure the correct tax breaks and allowances. The first known taxation took place in ancient Egypt around 3000-2800 BC. Late payments (non-compliance), as well as tax evasion or denial of taxes are punishable. Taxes consist of direct or indirect taxes and can be paid in cash or equivalent work.

Most countries have a tax system to pay for agreed public, common-society, or national government needs and functions. Some charge a fixed percentage of tax on annual personal income, but most tiered taxes are progressive and based on brackets of annual income amounts. Most countries impose a tax on both individual income and corporate income. Countries or sub-entities also typically collect property taxes, inheritance taxes, inheritance taxes, gift taxes, property taxes, sales taxes, use taxes, payroll taxes, royalties, and/or duty.

In economic terms, taxes transfer wealth from households or businesses to the state. This has implications for economic growth and prosperity that can be increased (known as the fiscal multiplier) or decreased (known as the excessive tax burden). Consequently, taxation is a hotly debated topic by some, although the general consensus is that taxation is necessary for society to function and grow in an orderly and equitable manner, others, such as libertarians and anarcho-capitalists, condemn taxation in general. or in its own right. Whole. Classification as theft or extortion through coercion and use of force.

Summary[edit]

The legal definition and the economic definition of taxes are somewhat different, so many transfers to governments are not considered by economists to be taxes. For example, some transfers to the public sector are comparable to prices. Examples include tuition fees at public universities and fees for services provided by local governments. Governments also obtain resources through the "creation" of money and currency (eg, printing banknotes and minting coins), through voluntary donations (eg, contributions to public universities and museums), through the imposition of sanctions (eg, traffic fines), through indebtedness and confiscation of the proceeds of crime. From the perspective of economists, a tax is an impunity but compulsory transfer of resources from the private to the public sector, collected on the basis of predetermined criteria and without reference to specific benefits.

In modern tax systems, governments collect taxes in money; but taxes in kind and compulsory labor are characteristic of traditional or pre-capitalist states and their functional equivalents. The manner of taxation and public spending of the taxes collected is often a matter of controversy in politics and business. Tax collection is carried out by a government agency such as the Internal Revenue Service (IRS) in the United States, Her Majesty's Revenue and Customs Service (HMRC) in the United Kingdom, the Canada Revenue Agency, or the Australian Tax Office. If taxes are not paid in full, the state may impose civil (such as fines or forfeiture) or criminal (such as imprisonment) penalties on the nonpaying entity or person.

purposes and effects

Tax collection is intended to generate revenue to finance the government or change prices to influence demand. States and their functional equivalents throughout history have used the money provided by taxes to perform many functions. Some of these include spending on economic infrastructure (roads, public transportation, sanitation, legal systems, public safety, public education, public health systems), military, scientific research and development, culture and the arts, public works, distribution, collection, and data dissemination. , Public Insurance and Governance Itself A government's ability to collect taxes is known as its fiscal capacity.

When spending exceeds tax revenue, a government accumulates public debt. Some of the taxes can be used to pay off past debts. Governments also use taxes to finance welfare and public services. These services may include education systems, pensions for the elderly, unemployment benefits, transfers, subsidies and public transport. Energy, water and waste management systems are also common public services.

According to proponents of the Chartalist theory of money creation, as long as the government in question can issue fiat money, taxes on government income are not needed. According to this view, the purpose of taxes is to maintain currency stability, express public policy regarding the distribution of wealth, subsidize specific industries or population groups, or isolate the cost of specific services such as highways or social Security.

The impact of taxes falls into two basic categories:

Substitution effect and income effect when taxing and good.

For example, consider two normal goods, x and y, whose prices are px and py, respectively, and an individual budget constraint given by the equation xpx + ypy = Y, where Y is income, the slope of the budget constraint, at a A graph that plots good x on the vertical axis and good y on the horizontal axis is equal to -py/px . The initial equilibrium is at the point (C) where the budget constraint and the indifference curve meet, introducing an ad valorem tax on good y (budget constraint: pxx + py(1 + τ)y = Y), the slope of the budget constraint becomes equal to -py(1 + τ)/px. The new equilibrium is now at the tangent point (A) with a lower indifferent curve.

As can be seen, the introduction of the tax has two consequences:

1. Changes the real income of consumers (less purchasing power)
2. The relative price of good y increases.

The income effect shows the variation in goods and given by the change in real income. The substitution effect shows the variation of y well determined by the variation of relative prices. This type of taxation (causing the substitution effect) can be seen as distorting.

Budget constraints change after the introduction of a flat rate tax or a general consumption tax or a proportional income tax.

Another example may be the introduction of a flat rate income tax (xpx + ypy = Y - T), where, while shifting the budget constraint downward, higher revenues can be obtained with the same loss of consumer benefits. compared to the case of property tax. from another point of view, the same income would be achieved with a lower utility sacrifice. The lesser benefit (given the same revenue) or lesser revenue (given the same benefit) given by a distortionary tax is known as excess pressure. The same result achieved with a fixed rate of revenue can be achieved with the following types of taxes (all just cause a budget constraint change without causing a substitution effect), the slope of the budget constraint stays the same (-px/py) :

• A general consumption tax: (budget constraint: px(1 + τ)x + py(1 + τ)y = Y)
• A proportional income tax: (budget constraint: xpx + ypy = Y(1 - t))

If the rates t and τ are chosen considering this equation (where t is the income tax rate and tau is the consumption tax rate):

11+τ=1−t⇒t=τ1+τ{\displaystyle {\frac {1}{1+\tau}}=1-t\Rightarrow t={\frac {\tau}{1+\tau} }}

the effects of the two taxes are the same.

A tax effectively changes the relative prices of products. Therefore, most economists, particularly neoclassical economists, argue that unless there are externalities (positive or negative) related to the taxed activities that must be internalized to achieve an efficient market outcome, taxes create distortions in the market. market and lead to economic inefficiency to achieve it. Therefore, they tried to identify the type of control system that would minimize this bias. Recent research suggests that the federal government in the United States actually taxes investment in higher education more heavily than it subsidizes higher education, contributing to skilled labor shortages and abnormally high pre-tax income differentials among undergraduates. highly educated and the less educated: trained. workers

Taxes can even affect labor supply: we can consider a model in which the consumer chooses the number of hours worked and the amount spent on consumption. Suppose there is only one good and no income is saved.

Consumers have a certain number of hours (H) divided between work (L) and leisure (F = H - L). The hourly wage is called w and indicates the opportunity cost of free time, that is, the income that the individual gives up by consuming an additional hour of free time. Consumption and hours worked are positively related, with more hours worked meaning more earnings, and assuming workers are not saving money, higher earnings imply increased consumption (Y = C = wL). Leisure and consumption can be seen as two normal goods (employees must choose between working an extra hour, which would mean consuming more, or having an extra hour of free time) and the budget constraint is negatively biased (Y = w( H-F )). The indifference curve for these two goods slopes downward, and leisure time becomes more important when consumption is high. Because a high level of consumption means that people are already working long hours, so in this situation they need more free time than they consume, and it implies that they have to earn a higher salary for working an extra hour. A proportional income tax that changes the slope of the budget constraint (now Y = w(1 - t)(H - F)) implies both substitution and income effects. The problem now is that the two effects work in opposite directions: the income effect tells us that the consumer feels poorer as a result of an income tax and therefore wants to work more, which increases the supply of labor. On the other hand, the substitution effect tells us that leisure as a normal good is now more convenient than consumption, and implies a reduction in the labor supply. Therefore, depending on the shape of the indifference curve, the overall effect may be an increase or a decrease in the supply of labor.

Laffer curve. The critical point in this case is a 70% tax rate. Profits increase up to this peak, then start to decrease.

The Laffer curve shows the level of government revenue as a function of the tax rate. It shows that at a tax rate above a certain critical rate, government revenue begins to fall as the tax rate increases as a result of a contraction in the labor supply. Support for this theory is that if the tax rate is above this critical point, a reduction in the tax rate should lead to an increase in the labor supply, which in turn would lead to an increase in government revenue.

Governments apply different types of taxes and vary the tax rates. They do so to distribute the tax burden among individuals or population groups involved in taxable activities, such as in the business sector, or to redistribute resources among individuals or population groups. Historically, taxes for the poor supported the nobility; Modern social security systems aim to support the poor, disabled or retired by taxing those who still work. In addition, taxes are collected to finance foreign aid and military enterprises, to affect the macroeconomic performance of the economy (a government's strategy for doing this is called fiscal policy; see also tax exemption), or to change patterns of consumption or employment within an economy to some extent. transaction classes can be made more or less attractive.

A state's tax system often reflects its communal values ​​and the values ​​of those currently in political power. To create a tax system, a state must make decisions about how the tax burden is shared (who pays taxes and how much) and how the taxes collected are spent. In democratic nations, where the public elects those responsible for establishing or administering the tax system, those elections reflect the kind of community the public wants to create. In countries where the public does not have significant influence over the tax system, that system may better reflect the values ​​of those in power.

All large companies incur administrative costs when transferring the revenue received from customers to the suppliers of the goods or services purchased. Taxation is no different, since governments are large organizations; The resource raised by the public through taxes is always greater than the amount that can be used by the government. [citation needed] The difference is called compliance costs and includes (for example) labor costs and other expenses related to compliance with tax laws and regulations. The collection of a tax to be spent for a specific purpose, such as the collection of a tax on alcohol to directly pay for alcoholism rehab centers, is called a mortgage. Finance ministers often do not like this practice because it restricts their freedom of action. Some economic theorists consider getting engaged intellectually dishonest, since money is actually fungible. In addition, it is common for taxes or excises originally collected to finance specific government programs to later be diverted to the general government fund. In some cases, such taxes are collected in fundamentally inefficient ways, such as highway tolls.

Because governments also settle commercial disputes, particularly in common law countries, similar arguments are sometimes used to justify a sales tax or VAT. Some (for example, libertarians) portray most or all forms of taxation as immoral due to their involuntary (and therefore ultimately coercive or violent) nature. The most extreme anti-tax vision, anarcho-capitalism, holds that all social benefits must be purchased voluntarily by the people who use them.

The Organization for Economic Cooperation and Development (OECD) publishes an analysis of the tax systems of member countries. As part of such analysis, the OECD has developed a system of definition and classification of excise taxes, which is generally followed below. In addition, many countries impose taxes (duties) on the importation of goods.

income tax

Many jurisdictions tax the income of individuals and businesses, including corporations. In general, the authorities tax a company's net profit, net profit, and other income. The calculation of taxable income may be determined in accordance with the accounting principles used in the jurisdiction, which may modify or supersede the tax principles of the jurisdiction. The incidence of taxes varies by system, and some systems may be considered progressive or regressive. Tax rates can vary or be constant (flat rate) depending on income level. Many systems allow individuals certain personal allowances and other non-business reductions in taxable income, although business deductions tend to be preferred over personal deductions.

Tax collecting authorities often collect personal income tax on an apportionment basis, with adjustments made after the end of the tax year. These fixes take one of two forms:

• Payments to the government from taxpayers who paid less during the tax year
• Government tax refunds to those who overpaid

Income tax systems often provide deductions that reduce the total tax liability by reducing the total taxable income. You can allow losses from one type of income to be offset by another; For example, a loss in the stock market can be deducted from payroll taxes. Other tax systems may isolate the loss so that corporate losses can only be deducted from business tax by carrying them over to subsequent tax years.

Negative income tax[edit]

In economics, a negative income tax (abbreviated NIT) is a progressive income tax system whereby people who earn less than a certain amount receive an additional payment from the state instead of paying taxes to the state.

Capital gains

Most jurisdictions that impose an income tax treat capital gains as part of taxable income. Capital gains are generally gains from the sale of fixed assets, i. h Those assets that are not held for sale in the ordinary course of business. Capital wealth includes private wealth in many jurisdictions. Some jurisdictions provide preferential tax rates or only partially tax capital gains. Some jurisdictions impose different rates or levels of capital gains tax depending on how long the asset has been held. Because tax rates on capital gains are typically much lower than those on ordinary income, there is a great deal of controversy and dispute over the proper definition of capital.

Seek

Corporate income tax refers to income tax, capital tax, wealth tax, or other taxes imposed on corporations. Tax rates and the tax base for companies may differ from those for individuals or other taxpayers.

Government revenue, as a percentage of GDP, from social security contributions. For this data, 20% of the variation in GDP per capita -adjusted by Purchasing Power Parity (PPP)- is explained by income from social security and the like.

Many countries offer publicly funded health or pension systems. In relation to these systems, the country normally requires employers and/or employees to make compulsory payments. These payments are often calculated using wages or self-employment earnings. Tax rates are generally fixed, but employers may be subject to a different tax rate than employees. Some systems impose a ceiling on taxable income. Some systems provide that the tax is only paid on wages above a certain level. Such caps or floors may apply to retirement, but not to the health components of the tax. Some have argued that such wage taxes are a form of "forced saving" and not really a tax, while others point to redistribution through such schemes between generations (from newer cohorts to older cohorts) and between levels. of income (from higher income levels to a lower income level), suggesting that such programs are in fact taxable and spending programs.

name the workmanship

Unemployment taxes and the like are often levied on employers on a total payroll basis. These taxes can be collected at both the state and sub-state levels.

An estate tax is levied on the total value of personal property, including: bank deposits, real estate, assets in insurance and pension plans, unincorporated business ownership, financial securities, and personal trusts. Liabilities (mainly mortgages and other loans) are usually deducted, for what is sometimes called net worth tax.

Ownership[edit]

Recurring property taxes may apply to real property (real estate) and some classes of personal property. In addition, recurring taxes can tax the net worth of natural or legal persons. Many jurisdictions impose inheritance taxes, gift taxes, or other inheritance taxes on property at the time of death or gift. Some jurisdictions impose taxes on financial or capital transactions.

property taxes

A property tax (or millage tax) is an ad valorem tax on the value of a property that the property owner must pay to the government where the property is located. Multiple jurisdictions can encumber the same property. There are three general types of property: real estate, real estate improvements (man-made real property, such as buildings), and personal property (personal property). Real estate or real estate is the combination of land and improvements to the property.

Property taxes are generally collected on a regular basis (for example, annually). A common type of estate tax is an annual charge on real estate ownership, with the tax base being the appraised value of the property. For more than 150 years from 1695, the government of England imposed a tax on windows, with the result that you can still see listed buildings with their windows boarded up to save their owners money. A similar tax on stoves existed in France and elsewhere with similar results. The two most common types of event-related estate taxes are stamp duty, which is levied on a change of ownership, and inheritance tax, which many countries levy on the estate of the deceased.

Unlike a tax on real property (land and buildings), a land value tax (or LVT) is levied only on the unimproved value of land ("Land" in this case). can mean the economic term, that is, all natural resources, or the natural resources that are associated with specific areas of the earth's surface: "lots" or "parcels of land"). Defenders of the land value tax argue that it is economically justified because, unlike other taxes, it does not inhibit production, distort market mechanisms, or generate sunk profits.

When real property is held by a higher government entity or other entity that is not subject to local government taxes, the taxing authority may receive a payment in lieu of taxes to make up for some or all of the lost tax revenue.

Many jurisdictions (including many US states) regularly impose a general tax on residents who own personal property (personality) within the jurisdiction. Vehicle and vessel registration fees are subsets of this type of tax. The tax is often designed to be national, with big exceptions for things like food and clothing. Household items are often exempt if they are kept or used in the home. Any item not otherwise exempt may lose its exemption if it is regularly kept out of the home. As a result, tax collectors often scour newspaper articles for stories about wealthy individuals who have loaned art to museums for public display because the artwork is subject to personal estate tax. If a piece of art had to be shipped to another state for some retouching, it may also be subject to personal property taxes in that state.

inheritance

Inheritance tax, inheritance tax, and inheritance tax or lien are the names of various taxes incurred upon the death of a person. United States tax law distinguishes between an inheritance tax and an inheritance tax: the former is levied on the personal representative of the testator, while the latter is levied on the beneficiaries of the estate. However, this distinction does not apply in other jurisdictions; For example, using this terminology, the UK inheritance tax would be an inheritance tax.

expatriation

An expatriate tax is a tax imposed on people who renounce their citizenship or residency. The tax is often collected based on an estimated disposition of the person's entire estate. An example is the United States under the American Jobs Creation Act, where anyone with a net worth of $2 million or an average tax liability of $127,000 who renounces their citizenship and leaves the country is automatically considered to have this for evasion reasons. tax and is subject to a higher tax rate.

Transmission[edit]

Historically, in many countries, a contract must be sealed to be valid. The stamp fee is either a fixed amount or a percentage of the transaction value. The stamp has been abolished in most countries, but the stamp duty remains. Stamp duty is levied in the UK on the purchase of shares and securities, the issue of bearer securities and certain company transactions. Its modern derivatives, the stamp duty reserve tax and the stamp duty property tax, are levied on securities and real estate transactions, respectively. Stamp duty has the effect of discouraging speculative asset purchases by reducing liquidity. In the United States, transfer taxes are often collected by state or local government and (in the case of real property transfers) may be tied to the deed or other transfer document.

Wealth (net worth)[edit]

The governments of some countries require a declaration of the taxpayer's balance sheet (assets and liabilities) and a net wealth tax (assets less liabilities) as a percentage of net worth or as a percentage of net worth that exceeds a certain level. The tax can be collected by “individuals” or “legal entities”.

Goods and services

Added value[edit]

A value-added tax (VAT), also known as a goods and services tax (G.S.T), single business tax, or turnover tax in some countries, levies the equivalent of a sales tax on any value-added transaction. . For example, the steel sheet is imported from a machine manufacturer. This manufacturer pays VAT on the purchase price and remits this amount to the government. The manufacturer then turns the steel into a machine and sells the machine to a wholesaler at a higher price. The manufacturer charges VAT on the higher price, but only remits the excess in "value added" terms (the price over the cost of the steel sheet). The wholesaler then continues the process by charging the retailer VAT on the full price, but remits to the government only the amount related to the markup on sales. The final amount of VAT is paid by the final customer who cannot recover the previously paid VAT. For a VAT and a sales tax with identical rates, the total tax paid is the same, but it is paid at different points in the process.

VAT is usually administered by requiring the business to complete a VAT return detailing the VAT collected (called input tax) and the VAT it collected from others (called output tax). The difference between the output tax and the output tax is paid to the local tax authority.

Many tax authorities have introduced an automated VAT system that increases accountability and auditability through the use of computer systems, which also enables cybercrime offices. [citation needed]

Sales[edit]

Sales taxes are applied when a product is sold to the final consumer. Retail organizations claim that such taxes discourage retail sales. The question of whether they are generally progressive or regressive is currently the subject of much discussion. Those with higher incomes spend a smaller proportion of this, so a flat sales tax tends to have a regressive effect. Thus, it is common to exempt groceries, utilities, and other necessities from sales tax, as poor people spend a higher proportion of their income on these goods, so such exemptions make the tax more progressive. . This is the classic "you pay for what you spend" tax, as only those who spend money on non-exempt (ie luxury) items pay the tax.

A small number of US states rely entirely on sales taxes for state revenue because these states do not collect state income taxes. Such states typically have moderate to large tourism or interstate travel occurring within their borders, allowing the state to benefit from taxes from individuals the state would not otherwise tax. In this way, the State can reduce the tax burden of its citizens. The US states that do not collect state income tax are Alaska, Tennessee, Florida, Nevada, South Dakota, Texas, Washington state, and Wyoming. Also, New Hampshire and Tennessee impose state income taxes only on dividends and interest income. Of the above states, only Alaska and New Hampshire do not have a state sales tax. Visit the website of the Federation of Tax Administrators for more information.

In the United States, there is a growing movement to replace all state payroll and income taxes (both corporate and personal taxes) with a national retail sales tax and a monthly tax refund for citizen and legal alien households. . The tax proposal is called the FairTax. In Canada, the state sales tax is known as Goods and Services Tax (GST) and is now 5%. The provinces of British Columbia, Saskatchewan, Manitoba, and Prince Edward Island also have a Provincial Sales Tax [PST]. The provinces of Nova Scotia, New Brunswick, Newfoundland and Labrador, and Ontario have harmonized their provincial sales taxes with the GST (Harmonized Sales Tax [HST]) and are therefore one complete sales tax. The province of Quebec applies Quebec sales tax [QST], which is based on GST with some differences. Most businesses can reclaim the GST, HST and QST they have paid and therefore the end user pays the tax.

special taxes

A special tax is an indirect tax that is levied on goods during the process of their manufacture, production or distribution and is usually proportional to their quantity or value. Excise taxes were first introduced in England in 1643 as part of a system of revenue and tax devised by John Pym MP and approved by the Long Parliament. These levies consisted of charges on beer, ale, cider, cherry wine, and tobacco, to which were later added paper, soap, candles, malt, hops, and candy. The basic principle of excise duties was that they were taxes on the production, manufacture or distribution of items that could not be levied through customs, and the revenue from this source is called excise duties proper. The basic conception of the term is that of a tax on articles produced or manufactured in a country. When luxury items such as spirits, beer, tobacco, and cigars are taxed, it is common to impose a certain duty (a tariff) on the importation of these items.

Excise taxes (or exemptions from them) are also used to change consumption behavior in a specific area (social engineering). For example, a high excise tax is used in comparison to other goods to discourage alcohol consumption. This can be combined with a pledge if the proceeds are used to pay for the cost of treating illnesses caused by an alcohol use disorder. Similar taxes may be imposed on tobacco, pornography, etc., and collectively may be referred to as "sin taxes." A carbon tax is a tax on the consumption of non-renewable, carbon-based fuels such as gasoline, diesel, jet fuel, and natural gas. The goal is to reduce the release of carbon into the atmosphere. In the UK, Vehicle Excise is an annual tax on vehicle ownership.

An import or export duty (also called a duty or levy) is a fee charged for moving goods across a political border. Tariffs inhibit trade and can be used by governments to protect domestic industry. Often a portion of customs revenue is pledged to pay the government to maintain a naval or border police force. The classic ways of circumventing customs are smuggling or misrepresenting the value of the goods. Fiscal, customs and trade rules are mostly set together today due to their common impact on industrial, agricultural and investment policies. A trading bloc is a group of allied countries that agree to minimize or eliminate tariffs on trade between them and possibly impose protective tariffs on imports from outside the bloc. A customs union has a common external tariff, and participating countries share revenue from customs duties on goods entering the customs union.

In some societies, local authorities may also impose duties on the movement of goods between regions (or through certain internal gateways). A notable example is the likin, which became an important source of revenue for local governments in late Qing China.

License fees[edit]

Occupational taxes or royalties may be imposed on corporations or individuals engaged in specific businesses. Many jurisdictions impose a vehicle tax.

Survey[edit]

A poll tax, also known as a poll tax or poll tax, is a tax that collects a fixed amount per person. It is an example of the flat tax concept. One of the first taxes mentioned in the Bible of half a shekel a year from each adult Jew (Exodus 30:11-16) was a form of poll tax. Poll taxes are administratively convenient because they are easy to calculate and collect and difficult to cheat. Economists consider poll taxes to be economically efficient because people are assumed to have a fixed supply, and therefore poll taxes do not introduce economic distortions. However, poll taxes are very unpopular because poorer people pay a higher proportion of their income than richer people. Furthermore, the supply of people is not effectively fixed over time: on average, when a poll tax is levied, couples choose to have fewer children - the Peasants' Revolt of 1381. Scotland was the first country to try the new poll tax in 1989. , followed by England in 1990 and Wales. commonly known as the Poll Tax) led to widespread non-payment and civil unrest known colloquially as the "Poll Tax Disturbance".

Others

Some types of taxes have been proposed, but have not actually been implemented in any major jurisdiction. These include:

Descriptive labels[edit]

Ad valorem and per unit[edit]

An ad valorem tax is a tax where the tax base is the value of a good, service or property. Sales taxes, duties, property taxes, inheritance taxes, and sales taxes are different types of ad valorem taxes. An ad valorem tax is generally levied at the time of a transaction (sales tax or value added tax (VAT)), but may be levied annually (property tax) or in connection with some other significant event (property tax). inheritance or customs duties) .

Unlike ad valorem taxation, it is a flat rate tax in which the tax base is the quantity of something, regardless of its price. A special tax is an example.

Consumption[edit]

Excise tax refers to any tax on non-investment expenses and can be implemented through a sales tax, excise tax, or by modifying an income tax to allow unlimited deductions for investments or savings.

environment

These include the natural resource consumption tax, the greenhouse gas (carbon) tax, the “sulfur tax” and others. The stated goal is to reduce environmental impact through price adjustments. Economists refer to environmental impacts as negative externalities. As early as 1920, Arthur Pigou proposed a tax to deal with externalities (see also the next section). The correct implementation of environmental taxes has been the subject of a long debate.

Proportional, progressive, regressive and flat.

An important characteristic of tax systems is the percentage of the tax burden in relation to income or consumption. The terms progressive, regressive, and proportional are used to describe how the rate progresses from lower to higher, from higher to lower, or proportionally. The terms describe a distributional effect that can be applied to any type of tax regime (income or consumption) that fits the definition.

• A progressive tax is a tax that is collected in such a way that the effective tax rate increases as the amount to which the tax rate is applied increases.
• The opposite of a progressive tax is a regressive tax, in which the effective tax rate decreases as the amount to which the rate applies increases. This effect often occurs when the means test is used to evade tax breaks or government benefits.
• In the middle is a proportional tax, where the effective tax rate is fixed while the amount to which the rate is applied increases.
• A flat rate tax is a tax that is a fixed amount regardless of change in the circumstances of the taxed entity. In fact, it is a regressive tax because people with lower incomes have to spend a higher percentage of their income than people with higher incomes, and therefore the effect of the tax decreases with income.

The terms can also be used to apply meaning to selected consumption taxation, such as a tax on luxury goods and the exemption on basic necessities can be described as progressive as it increases the tax burden on high-end consumption and a tax reduces the burden on low-level consumption.

direct and indirect

Taxes are sometimes called "direct taxes" or "indirect taxes." The meaning of these terms can vary in different contexts, which can sometimes lead to confusion. An economic definition by Atkinson states that "...direct taxes can be tailored to the individual characteristics of the taxpayer, while indirect taxes apply to transactions regardless of the circumstances of the buyer or seller." Under this definition, for example, income tax is "direct" and sales tax is "indirect."

Legally, the terms can have different meanings. For example, in US constitutional law, direct taxes refer to poll taxes and property taxes based on mere existence or possession. Indirect taxes tax facts, rights, privileges and activities. Thus, a tax on the sale of the property would be considered an indirect tax, while the tax on the mere possession of the property itself would be a direct tax.

Fares and cash[edit]

Governments may charge user fees, tolls, or other types of assessments in exchange for certain goods, services, or use of property. These are generally not considered taxes as long as they are collected as payment for a direct benefit to the payer. These fees include:

• Toll: A fee charged for travel on a highway, bridge, tunnel, canal, waterway, or other transportation facility. Historically, tolls have been used to pay for public bridge, highway and tunnel projects. They were also used on privately built transport links. The toll is expected to be a flat fee, possibly tiered by vehicle type or, for long trips, by distance.
• User fees, such as those charged for the use of parks or other government facilities.
• Decision fees charged by government agencies to make decisions in certain situations.

Some scholars refer to certain economic effects as taxes, even though they are not taxes imposed by governments. These include:

History

The first known tax system was in ancient Egypt around 3000-2800 BC. in the first dynasty of the Old Kingdom of Egypt. The oldest and most widespread forms of taxation were corvage and tithes. Body labor was forced labor provided to the state by peasants too poor to pay other forms of tax (labor was synonymous with tax in ancient Egypt). Records from the time document that the pharaoh toured the kingdom every two years and collected tithes from the people. Other records are granary and papyrus receipts. Early taxation is also described in the Bible. In Genesis (chapter 47, verse 24 – the new international version) it says: “But when the harvest comes, give a fifth to Pharaoh. The other four fifths you can save as seed for the fields and as food for you, your families and your children." Samgharitr is the name mentioned in the Vedic texts for the tax collector. In Hattusa, the capital of the Hittite Empire, El Grain was collected as a tax from neighboring countries and stored in silos to display the king's wealth.

In the Persian Empire, 500 B.C. introduced a tax system regulated and sustainable by Darío I the Great; The Persian tax system was tailored to each satrapy (the area ruled by a satrap or provincial governor). At different times there were between 20 and 30 satrapies in the empire and each was ranked according to their perceived productivity. It was the satrap's responsibility to collect the amount owed and, after deducting his expenses, send it to the treasury (expenses and the power to decide exactly how and by whom the money should be collected in the province offer maximum opportunity for the wealthy). crops). The amounts demanded from the different provinces gave a clear image of their economic potential. For example, Babylon was valued for the highest amount and for a bewildering mix of goods; 1,000 talents of silver and four months' provisions for the army. India, a province famous for its gold, was supposed to hand over 4,680 talents of silver in gold dust. Egypt was known for the bounty of its harvests; It was to be the granary of the Persian Empire (and later the Roman Empire) and, in addition to 700 talents of silver, it would deliver 120,000 measures of grain. This tax was applied only to the satrapies based on their land, productive capacity and level of tribute.

The Rosetta Stone, made by Ptolemy V in 196 B.C.

In the Roman Republic, taxes were levied on individuals ranging from 1% to 3% of the assessed value of their total wealth. However, since it was extremely difficult to facilitate the collection of the tax, the government auctioned it off every year. The winning tax tenants (called publicani) paid the tax revenue to the government in advance and then kept the taxes collected from the people. The publicani paid taxes in coin, but collected the taxes through other means of exchange, relieving the government of the burden of doing the currency conversion itself. The income payment essentially functioned as a loan to the government, which paid interest on it. Although this system was a profitable venture for both the government and the publicans, the Emperor Augustus later replaced it with a system of direct taxation; From then on, each province was required to pay a 1% wealth tax and a single tax for each adult. This led to a regular census and changed the tax system more towards taxing an individual's income than wealth.

Islamic rulers collected zakat (a tax on Muslims) and jizya (a poll tax on conquered non-Muslims). In India, this practice began in the 11th century.

Numerous records of government tax collection in Europe dating back to at least the 17th century are still available today. However, the level of taxes is difficult to compare with the size and flow of the economy because production figures are not as readily available. Government expenditure and revenue in France increased in the seventeenth century from about £24.30 million in 1600-10 to about £126.86 million in 1650-1659 to about £117.99 million in 1700 -10 when the national debt had reached 1.6 billion pounds. In 1780-1789 it reached 421.50 million pounds. Taxation as a percentage of the production of final products may have reached 15-20% in countries such as France, the Netherlands and Scandinavia in the 17th century. During the war years of the 18th and early 19th centuries, tax rates in Europe rose dramatically as warfare became more costly and governments became more centralized and more adept at collecting taxes. This increase was greatest in England, with Peter Mathias and Patrick O'Brien noting that the tax burden increased by 85% during this period. Another study corroborated this figure, noting that per capita tax revenues had increased nearly sixfold over the course of the 18th century, but that steady economic growth had only doubled the actual burden on each individual in this pre-industrial era. Effective tax rates in Britain in the years before the French Revolution were higher than in France, twice as high in relation to per capita income, but applied mainly to international trade. In France, taxes were lower, but the burden fell mainly on landlords, private individuals and internal trade, and therefore generated much more resentment.

Taxation as a percentage of GDP in 2016 was 45.9% in Denmark, 45.3% in France, 33.2% in the UK, 26% in the US and an average of 34.3% among all OECD members.

In pre-fiat banking economies, seigniorage, the tax on money creation, was a critical form of taxation.

Other outdated tax forms are:

• scutage, which is paid in lieu of military service; Strictly speaking, it is a conversion of a non-tax liability rather than a tax as such, but in practice it works like a tax.
• Tallage, a tax on feudal dependents.
• Tithe, a parafiscal payment (one-tenth of one's income or farm produce) paid to the Church (and therefore too specific to technically be a tax). This is not to be confused with the modern practice of the same name, which is usually voluntary.
• Aids (feudal), a type of tax or levy paid by a vassal to his lord in feudal times.
• Danegeld, a medieval property tax originally levied to pay raiding Danes and later used to finance military expenditures.
• Carucage, a tax that replaced the danegeld in England.
• Tax farming, the principle of delegating the responsibility of collecting tax revenue to individuals or groups.
• Socage, a feudal tax system based on land rent.
• Burgage, a feudal tax system based on land rent.

Some principalities taxed windows, doors or cabinets to reduce the consumption of imported glass and ironwork. Cabinets, stables and cabinets were used to evade taxes on doors and cabinets. In some cases, taxes are also used to enforce public policies, such as congestion charging (to reduce road traffic and encourage public transport) in London. In tsarist Russia, taxes were imposed on beards. Today, Germany has one of the most complicated tax systems in the world. Three quarters of the world tax literature refers to the German system. [citation needed] Under the German system there are 118 laws, 185 forms and 96,000 regulations that spend 3.7 billion euros to collect income taxes. [citation needed] In the United States, the IRS has approximately 1,177 forms and instructions, 28.4111 megabytes of 3.8 million words of the Internal Revenue Code as of February 1, 2010, numerous tax provisions in the Code of Federal Regulations and complementary material in the Internal Revenue Bulletin. Today, governments in more advanced economies (for example, Europe and North America) tend to rely more on direct taxes, while developing countries (for example, several African countries) rely more on indirect taxes. .

Economic impact

Tax revenue from public finances as a % of GDP. For this data, 32% of the variation in GDP per capita -adjusted by Purchasing Power Parity (PPP)- is explained by income from social security and the like.

In economic terms, taxes transfer wealth from households or corporations to the government of a nation. Adam Smith writes that in The Wealth of Nations

Secondary effects of taxes (for example, economic distortions) and optimal tax theories are an important topic in microeconomics. Taxation is almost never a simple transfer of wealth. Fiscal economic theories address the question of how economic prosperity can be maximized through taxation.

In a 2019 study that examined the impact of tax cuts on different income groups, it was tax cuts on low-income groups that had the most positive impact on job growth. Tax cuts for the top 10% have had little impact.

accident

The law determines to whom a tax applies. In many countries, taxes are imposed on businesses (for example, corporate taxes or parts of the payroll tax). However, who ultimately pays the tax (the tax burden) is determined by the market, since taxes are built into the cost of production. Economic theory suggests that the economic impact of a tax does not necessarily diminish at the time it is imposed by law. For example, an employment tax paid by the employer affects the employee, at least in the long run. Most of the tax burden tends to fall on the most inelastic factor involved: the party in the transaction least affected by a price change. For example, a payroll tax in a city will affect (at least in the long run) property owners in that area.

Depending on how quantities supplied and demanded vary with price (the "elasticities" of supply and demand), a tax may come from the seller (in the form of lower pre-tax prices) or from the buyer (in the form of of a higher subsequent price). tax prices). When the elasticity of supply is low, the supplier pays more taxes. If the elasticity of demand is low, the customer pays more; and vice versa for cases in which these elasticities are high. If the seller is a competitive company, the tax burden is distributed among the factors of production based on their elasticities; These include workers (in the form of lower wages), investors (in the form of shareholder losses), landowners (in the form of lower rents), entrepreneurs (in the form of lower supervisory wages), and customers (in the form of of losses to shareholders shareholders). form of higher prices).

To show this relationship, assume that the market price of a product is $1.00 and that the product has a tax of $0.50 that by law must be collected from the seller. If the product has elastic demand, the seller will absorb more of the tax. This is because goods with elastic demand cause a large decrease in quantity that requires a small increase in price. Therefore, to stabilize sales, the seller bears more of the additional tax burden. For example, the seller could reduce the price of the product to $0.70 so that the buyer pays a total of $1.20 more after tax is added, or $0.20 more than before the $0.50 tax was introduced. . In this example, the buyer paid $0.20 of the $0.50 tax (in the form of an after-tax price) and the seller paid the remaining $0.30 (in the form of a lower pre-tax price).

Greater economic prosperity

government spending

The purpose of taxes is to provide public spending without inflation. The provision of public goods such as roads and other infrastructure, schools, a social safety net, public health systems, national defense, law enforcement, and a judicial system increases the economic well-being of society when the benefits outweigh the associated costs.

Pigoviano

The existence of a tax can in some cases increase economic efficiency. If there is a negative externality associated with a good (meaning it has negative effects that are not felt by the consumer), then a free market will overtrade that good. By taxing the asset, the government can generate revenue to address specific problems while increasing general welfare.

The aim is to tax people when they incur social costs in addition to their personal costs. By taxing goods with negative externalities, the government seeks to increase economic efficiency while increasing revenue.

This type of tax is called a Pigov tax, after the economist Arthur Pigou, who wrote about it in his 1920 book The Economics of Welfare.

Pigouvian taxes could target the unwanted production of greenhouse gases that cause climate change (i.e. a carbon tax), polluting fuels (such as gasoline), water or air pollution (i.e. a tax green), goods that generate costs for public health (such as alcohol or tobacco). ) and excessive demand for certain public goods (for example, congestion charges). The idea is to focus taxes on those who are more socially harmful than average, so that the free market includes all costs and not just personal costs, with the benefit of reducing the overall tax burden on those who are less socially harmful. .

reduced inequality

Progressive taxes generally reduce economic inequality even when tax revenue is not redistributed from higher income earners to lower income earners. However, under a very specific condition, progressive taxation increases economic inequality when lower-income individuals consume goods and services produced by higher-income individuals, who in turn consume only by higher-income individuals (trickle-down effect).

Reduced economic prosperity

Most taxes (see ) have welfare-reducing side effects, either by imposing unproductive labor (compliance costs) or by distorting economic incentives (perverse and deadweight incentives).

Compliance costs[edit]

Although governments have to spend money on tax collection measures, some of the costs, particularly for record-keeping and form-filling, are borne by businesses and individuals. These are collectively known as compliance costs. More complex tax systems often have higher compliance costs. This fact can be used as a basis for practical or moral arguments in favor of tax simplification (such as FairTax or OneTax and some single tax proposals).

Takeaway costs[edit]

Graph illustrating the deadweight cost of taxes

In the absence of negative externalities, the introduction of taxes in a market reduces economic efficiency by causing sunk losses. In a competitive market, the price of a given commodity is adjusted to ensure that all trades that benefit both the buyer and the seller of the commodity are carried out. The imposition of a tax results in the price received by the seller being less than the cost to the buyer for the amount of the tax. This leads to fewer transactions taking place, which reduces economic prosperity; the people or companies involved are less wealthy than before the tax. The tax burden and the level of deadweight costs depend on the elasticity of supply and demand for the encumbered asset.

Most taxes, including income tax and sales tax, can have significant deadweight costs. The only way to avoid deadweight costs in a generally competitive economy is to avoid taxes that change economic incentives. Among these taxes is the land value tax, where the tax is levied on an asset in totally inelastic supply. By taxing the value of vacant land compared to what is built on it, a land value tax does not increase taxes for owners to improve their land. This is in contrast to traditional property taxes, which reward abandonment of land and discourage construction, maintenance, and repair. Another example of a low deadweight tax is a flat rate tax, such as a capitation tax (capitar tax) paid by all adults, regardless of their choice. A windfall tax may also fall into this category.

Deadweight losses do not take into account the impact of taxes on leveling the playing field for businesses. Companies that have more money are better able to fend off the competition. It is common for an industry with a small number of very large companies to have a very high barrier to entry for new entrants. Because the larger the group, the better your bargaining position with suppliers. Also, larger companies may operate with low or even negative profits for longer periods of time, thus crowding out the competition. However, a more progressive taxation of profits would remove such barriers for new entrants, thus increasing competition and ultimately benefiting consumers.

Perverse incentives[edit]

The complexity of tax law in developed economies offers perverse tax incentives. The more detailed the tax policy, the more opportunities there will be for legal tax avoidance and illegal tax evasion. These not only lead to lost revenue, but are also associated with additional costs: for example, payments for tax advice are essentially deadweight costs, since they do not bring prosperity to the economy. Perverse incentives also occur due to "hidden" non-taxable transactions; For example, a sale from one business to another may be subject to VAT, but if the same goods were shipped from one branch of one business to another, no tax would be payable.

To address these problems, economists often propose simple and transparent tax structures that avoid loopholes. For example, the sales tax can be replaced by a sales tax that ignores intermediate transactions.

Developing countries

According to research by Nicolas Kaldor, public finances in developing countries are strongly linked to government capacity and financial development. As government capacity develops, governments not only increase tax levels but also tax patterns. With the increase in larger tax bases and the decline in importance of the business tax, the income tax is gaining in importance. According to Tilly, state capacity develops in response to the outbreak of wars. War is an incentive for states to raise taxes and strengthen state capabilities. Historically, many fiscal advances took place during the war. The introduction of income tax in Great Britain was due to the Napoleonic War in 1798. The United States first introduced an income tax during the Civil War. Taxation is constrained by a country's fiscal and legal capabilities. Tax and legal capabilities also complement each other. A well-designed tax system can minimize inefficiencies and boost economic growth. With better compliance and support for financial institutions and private property, the government will be able to collect more taxes. Although richer countries have higher tax revenues, economic growth does not always translate into higher tax revenues. In India, for example, increases in tax breaks mean that income tax revenue has stagnated at around 0.5% of GDP since 1986.

EPS PEAKS researchers pointed out that the main objective of taxation is to mobilize income, provide resources to state budgets and form an important part of macroeconomic management. They said economic theory has focused on the need to "optimize" the system by balancing efficiency and equity, and understanding the implications for production and consumption, and distribution, redistribution, and welfare.

They claim that taxes and tax breaks have also been used as a tool for behavior change, influencing investment decisions, labor supply, consumer behavior, positive and negative economic spillovers (externalities), and, ultimately, to promote economic growth and development. The tax system and its administration also play an important role in the formation and governance of the state as the main form of “social contract” between the state and the citizens, who as taxpayers are therefore accountable to the state.

The researchers wrote that domestic revenue is an important part of a developing country's public financing because it is more stable and predictable than foreign aid and is necessary for a country to be self-sufficient. They found that national revenue streams are already, on average, much larger than official development assistance, with development assistance accounting for less than 10% of total taxes collected in Africa.

However, overseas development aid exceeds tax revenue in a quarter of African countries, which tend to be countries that are not resource-rich. This suggests that the countries that make the most progress in replacing aid with tax revenue tend to be those that benefit disproportionately from rising energy and commodity prices.

The author found that tax revenue as a percentage of GDP varies widely around a world average of 19%. These data also indicate that countries with higher GDP tend to have higher tax rates, showing that higher income is associated with disproportionately higher tax revenue. On average, high-income countries have tax revenue as a percentage of GDP of around 22%, compared with 18% in middle-income countries and 14% in low-income countries.

In high-income countries, the highest tax ratio is in Denmark at 47% and the lowest in Kuwait at 0.8%, reflecting low taxes from strong oil revenues. The long-term average performance of tax revenue as a percentage of GDP in low-income countries has generally stagnated, although most have shown some improvement in recent years. On average, resource-rich countries have made the most progress, from 10% in the mid-1990s to around 17% in 2008. Non-resource-rich countries have made some progress, with an increase of average tax revenue from 10% to 15%. in the same period of time.

Many low-income countries have a tax rate of less than 15% of GDP, which could be due to low tax potentials such as restrictions.

Some low-income countries have relatively high tax-to-GDP ratios due to resource tax revenues (eg Angola) or relatively efficient tax administration (eg Kenya, Brazil), while some Middle-income countries have a lower tax-to-GDP ratio (eg Malaysia) reflecting a more tax-friendly policy choice.

While general tax revenues have been broadly stable, the global trend shows that the share of business taxes in total revenues has decreased (IMF, 2011), with the share of revenues shifting from business taxes border taxes on domestic sales of goods and services. Low-income countries tend to rely more on business taxes and have a lower share of income and consumption taxes compared to high-income countries.

An indicator of taxpayer experience was captured in the Doing Business survey, which compares the general tax rate, the time it takes to comply with tax procedures and the number of payments required during the year in 176 countries. The "easiest" countries to pay taxes are in the Middle East, with the United Arab Emirates in first place, followed by Qatar and Saudi Arabia, most likely due to the low tax regimes in those countries. Sub-Saharan African countries are among the "hardest" to pay, with the Central African Republic, the Republic of the Congo, Guinea and Chad in the bottom five, due to higher overall tax rates and a greater administrative burden to comply.

Key facts[edit]

The following data was compiled by EPS PEAKS researchers:

• Trade liberalization has led to a decrease in business taxes as a percentage of total revenue and GDP.
• Resource-rich countries tend to generate more revenue as a percentage of GDP, but this is more volatile. Resource-rich sub-Saharan African countries have outperformed non-resource-rich countries in tax collection, but revenues are more volatile from year to year. Strengthening performance management creates tremendous investment opportunities for development and growth.
• Developing countries have an informal sector that averages around 40%, perhaps as high as 60% in some. There are many small informal traders in informal sectors who may not be able to be efficiently included in the tax net due to the high cost of collection and limited revenue potential (although there are broader governance benefits). There is also the problem of defaulting corporations that are "hard to tax", tax evaders and must be included in the tax net.
• In many low-income countries, most income is derived from a narrow tax base, sometimes due to a limited range of taxable economic activities. Thus, there is a reliance on a few, often multinational, taxpayers who can exacerbate the tax challenge by minimizing their tax liability, in some cases abusing the lack of capacity of tax authorities, sometimes abusing transfer pricing. . [more explanation needed]
• Developing and developed countries face great challenges when it comes to taxing multinational companies and international citizens. Estimates of tax revenue losses from tax evasion and avoidance in developing countries are limited by lack of data and methodological flaws, but some estimates are significant.
• Countries use incentives to attract investment, but doing so could unnecessarily forego revenue, as evidence suggests that investors are more influenced by economic fundamentals, such as market size, infrastructure, and capabilities, and only slightly by tax incentives (IFC Investor Surveys). For example, although the Armenian government supports the IT sector and tries to improve the investment climate, the small size of the domestic market, low salaries, low demand for productivity-boosting tools, financial constraints, high piracy rates of software and other factors are limiting the growth of this sector to a slow process. This means that tax incentives are not doing as much to develop the sector as is believed. Support for the IT industry and tax incentives were introduced in Armenia in the 2000s, and this example shows that such measures are not a guarantee of rapid economic growth.
• In low-income countries, compliance costs are high, involving lengthy processes, frequent tax payments, bribery, and corruption.
• Administrations are often understaffed, resources are not effectively directed to the areas of greatest impact, and middle management is weak. Coordination between domestic and customs is weak, which is particularly important for VAT. Weak administration, governance, and corruption are generally associated with low income (IMF, 2011).
• The evidence on the impact of aid on tax revenue is inconclusive. Tax revenues are more stable and sustainable than subsidies. While a revenue deterrent effect of subsidies is expected and has been supported by some previous studies, recent evidence does not support this conclusion and, in some cases, suggests higher tax revenues after supporting revenue mobilization.
• Of all regions, Africa has the highest overall corporate tax rates, averaging 57.4% of profits, but has fallen the most since 2004 from 70%, partly due to the introduction of VAT, and this should have a positive impact on the economy Impact on the US attract investment.
• Fragile states have less ability to increase tax revenue as a percentage of GDP, and any gains are more difficult to sustain. The tax administration tends to collapse when conflicts reduce the territory controlled by the state or reduce productivity. As economies rebuild after conflict, good progress can be made in developing effective tax systems. Liberia grew from 10.6% of GDP in 2003 to 21.3% in 2011. Mozambique grew from 10.5% of GDP in 1994 to around 17.7% in 2011.

Summary[edit]

Revenue relief interventions can support revenue mobilization for growth, improve tax system design and administrative efficiency, and strengthen governance and compliance. The author of the Economics Topic Guide noted that the best modalities for revenue support depend on country circumstances, but should aim to align with government interests and facilitate effective planning and implementation of evidence-based tax reform activities. . Finally, he noted that identifying areas for further reform requires a country-specific diagnostic assessment: broad areas identified internationally (eg by the IMF) for developing countries include, for example, wealth taxes for local income, strengthening of spending management and effective taxation of extractive industries and multinational companies.

Support[edit]

According to most political philosophies, taxes are justified because they finance activities that are necessary and beneficial to society. Additionally, progressive taxation can be used to reduce economic inequality in a society. According to this view, taxes in modern nation states benefit the majority of the population and social development. A common exposition of this view, to paraphrase various statements made by Oliver Wendell Holmes Jr., is "Taxes are the price of civilization."

It can also be argued that in a democracy society as a whole decides how the tax system should be organized, since the government is the party that collects taxes. The motto of the American Revolution "There are no taxes without representation" implied this view. For traditional conservatives, paying taxes is justified as part of the general duties of citizens to obey the law and support established institutions. The conservative position is summed up in perhaps the most famous adage in public finance: "An old tax is a good tax." Conservatives hold to the "fundamental conservative premise that no one should be excused from paying for government for fear of believing that government is free to them, with the sure consequence that they will demand more government 'services'." Social Democrats generally advocate higher tax rates to finance public provision of a wide range of services, such as universal health care and education, and the provision of a variety of social benefits. As Anthony Crosland and others have argued, the ability to tax capital gains is central to the social democratic argument for a mixed economy, as opposed to the Marxist arguments for extensive public ownership of capital. American libertarians recommend minimum taxes to maximize the protection of liberty.

Compulsory personal taxation, such as B. income tax, is often justified on grounds such as territorial sovereignty and the social contract. Proponents of corporate taxation argue that it is an efficient way to tax income that ultimately accrues to individuals, or that taxing corporations separately is justified because business activity necessarily involves the use of publicly built and maintained economic infrastructure. and that these companies are charged for it. wear. Georgian economists argue that all economic rent collected from natural resources (land, mineral exploitation, fishing quotas, etc.) is unearned income and belongs to the community and not to an individual. They advocate a heavy tax (the "single tax") on land and other natural resources to return this unearned income to the state, but no other tax.

Against[edit]

Because paying taxes is mandatory and enforced by the legal system, rather than voluntarily as with crowdfunding, some political philosophies view taxes as theft, extortion, slavery, a violation of property rights, or tyranny. , and accuse the government of using force and coercion to collect taxes. Objectivists, anarcho-capitalists, and right-libertarians view taxation as state aggression through the lens of non-aggression. The view that democracy legitimizes taxes is rejected by those who argue that all forms of government, including democratically elected laws, are inherently repressive. According to Ludwig von Mises, "society as a whole" should not make such decisions on the basis of methodical individualism. Libertarian tax opponents claim that state protections, such as police and defense forces, could be replaced by free-market alternatives, such as private defense agencies, arbitration boards, or voluntary contributions.

Murray Rothbard argued in The Ethics of Liberty in 1982 that taxes are legitimate theft and therefore tax resistance: "Just as no one is morally bound to answer a thief truthfully when he asks if there are valuables in your home, so no one can be morally required to truthfully answer similar questions from the state, eg when filing income tax returns.

Many see government spending as an inefficient use of capital and that the same projects that the government is trying to develop can be developed by private companies at much lower cost. This line of reasoning holds that government employees are not as personally invested in the efficiency of projects, so overspending occurs every step of the way. Also, many officials are not chosen for their project management skills, so projects can be mismanaged. In the United States, President George W. Bush proposed in his 2009 budget to "terminate or reduce 151 discretionary programs" that were inefficient or ineffective.

Furthermore, critics of taxation point out that the taxation process not only unduly costs citizens money, but also unduly costs citizens a great deal of time. For example, the American Action Forum estimates that Americans spend 6.5 billion hours a year preparing their taxes. This equates to approximately 741,501 years of life lost each year from filing tax forms and other related paperwork.

Karl Marx assumed that taxes would become superfluous after communism and hoped for the "diminishment of the state". In socialist economies like China, taxes played a secondary role, as most government revenue came from corporate ownership, and some argued that monetary taxes were unnecessary. While the morality of taxes is sometimes questioned, most arguments about taxes revolve around the level and method of taxes and the government spending involved, not the taxes themselves.

Tax election is the theory that taxpayers should have more control over how their individual taxes are allocated. If taxpayers could choose which government organizations receive their taxes, opportunity cost decisions would incorporate their partial knowledge. For example, a taxpayer who spends more of his taxes on public education would spend less on public health. Proponents argue that it would allow taxpayers to demonstrate their preferences to ensure that the government manages to efficiently produce the public goods that taxpayers truly value. This would put an end to real estate speculation, business cycles and unemployment, and would distribute wealth much more evenly. Joseph Stiglitz's Henry-George theorem predicts its sufficiency because, as George also pointed out, government spending increases the value of land.

Geoists (Georgists and Geolibertarians) claim that taxation should primarily increase economic rent, particularly land value, for reasons of both economic efficiency and morality. The efficiency of using economic rent for taxation lies (as economists agree) in the fact that such taxation cannot be passed through and does not generate deadweight losses, and that it removes the incentive to speculate on land. Their morality is based on the geoistic premise that private property is justified by the products of labor but not by land and natural resources.

Economist and social reformer Henry George opposed sales taxes and duties because of their negative impact on trade. He also believed in the right of every person to the fruits of his own labor and productive investment. Therefore, income from paid work and personal property must remain tax free. For this reason, many geoists, particularly those who call themselves geolibertarians, share the view with libertarians that these (but not all) types of taxes are immoral and even theft. George explained that there should be a single tax: the land value tax, which is considered efficient and moral. Demand for specific lands depends on nature, but even more so on the presence of communities, commerce, and government infrastructure, particularly in urban settings. Therefore, the basic economic income is not the product of any particular person and can be claimed as a public expense. According to George, this would end housing bubbles, business cycles and unemployment, and distribute wealth much more evenly. Joseph Stiglitz's Henry George theorem predicts that it is sufficient to finance public goods because they increase the value of land.

John Locke explained that whenever labor is commingled with natural resources, as is the case with improved land, private ownership is justified as long as sufficient other natural resources of the same quality must be available to others. Geologists claim that the Lockean warning is violated when the value of land is greater than zero. Therefore, according to the accepted principle of the equal right of all people to natural resources, the owner of such land must compensate the rest of society in the amount of this value. Because of this, geologists generally believe that such a payment cannot be considered a true "tax", but rather compensation or a fee. This means that while geoists also see tax as a tool for social justice, unlike social democrats and social liberals, they do not see it as a redistributive instrument, but rather as "pre-distribution" or simply a proper distribution of income. common goods. .

Modern geologists point out that land, in the classical economic sense of the word, denotes all natural resources and thus includes resources such as mineral deposits, bodies of water, and the electromagnetic spectrum, to which privileged access it also generates an economic rent that must be compensated. . By the same reasoning, most consider Pigou taxes acceptable and even necessary as compensation for environmental damages or privileges.

theories

Laffer curve

In economics, the Laffer curve is a theoretical representation of the relationship between government revenue generated through taxes and all possible tax rates. It is used to illustrate the concept of taxable income elasticity (that taxable income changes in response to changes in the tax rate). The curve is constructed through a thought experiment. First, the amount of tax revenue at the extreme tax rates of 0% and 100% is considered. It is clear that a 0% tax rate does not generate revenue, but the Laffer curve hypothesis states that a 100% tax rate will not generate revenue either because at that rate there is no longer any incentive for a rational taxpayer to generate revenue. . Thus, the income generated will be 100% nothing. If both a 0% tax rate and a 100% tax rate generate no revenue, the extreme value theorem implies that there must be at least one intermediate tax rate at which tax revenue would be maximum. The Laffer Curve is typically represented as a graph that starts with 0% tax and zero revenue, rises to a maximum rate of revenue collected at an intermediate tax rate, and then falls back to zero revenue at a 100% tax rate.

One possible result of the Laffer curve is that raising tax rates beyond a certain point becomes counterproductive to further increasing tax revenue. Only one hypothetical Laffer curve can be estimated for any given economy, and such estimates are sometimes questioned. The New Palgrave Dictionary of Economics reports that estimates of revenue-maximizing tax rates vary widely, averaging around 70%.

Better[edit]

Most governments collect more revenue than can be provided by non-distorting taxes or taxes that generate a double dividend. Optimal taxation theory is the branch of economics that studies how taxes can be structured to produce the lowest deadweight costs or the best welfare outcomes. Ramsey's problem has to do with minimizing deadlift costs. Since deadweight costs are related to the elasticity of supply and demand for a good, it follows that imposing the highest tax rates on goods for which supply and demand are most inelastic will result in deadweight costs. lower total deadlifts. Some economists have tried to integrate optimal taxation theory with the social welfare function, which is the economic expression of the idea that equality is more or less valuable. When individuals experience diminishing returns to income, the optimal distribution of income for society implies a progressive income tax. Mirrlee's optimal income tax is a detailed theoretical model of the optimal progressive income tax in this direction. In recent years, many political economists have debated the validity of the optimal taxation theory.

Taxes are generally collected as a percentage called the tax rate. One important difference when it comes to tax rates is the distinction between the and the . The effective rate is the total tax paid divided by the total amount on which the tax is paid, while the marginal rate is the rate paid on the next dollar earned. For example, if income were taxed under a formula of 5% from $0 to $50,000, 10% from $50,000 to $100,000, and 15% on $100,000, a taxpayer with income of $175,000 would pay a total of $18,750 in taxes.

At what simple interest rate will an amount double in 20 years?

Also R =5%.

At what simple interest rate will a sum triple in 20 years?

R=12 5%

What is the simple interest rate that will double a sum of money in 25 years?

Detailed Solution The sum of money doubles in 25 years. Concept: Simple interest is the interest calculated on the principal of the loan or the original contribution to the savings account. ∴ The interest rate per year is4%.

At what simple interest rate will a sum of money double in 10 years?

As we know, simple interest means the principal amount subtracted from the final amount, i.e. H. This gives the required rate at which the sum doubles in 10 years.10%.