TAXATION

In poetry, spring is a time when a young person's fancy turns to thoughts of love. But in economics, spring is much less romantic period. It is the season when millions of people in many countries begin to sort their previous year's income and expense records the first step in determining their personal income tax.

In calculating this tax, you are allowed to take specific types of deductions and exemptions. Some deductions that may be made (within limits) from your income are donations to your alma mater and to various non-profit organizations.

The amount of income tax you must pay at a given income level depends on several things. These include whether you are single or married and what the particular tax rates happen to be at the time. The rates are usually revised by the government every few years.

Tax is money compulsory levied by the state or local authorities on individuals, property, or businesses.In modern economies taxes are the most important source of government revenues. Taxes can be levied and classified in many ways. In many countries there are three principal types of taxes:

Taxes on income(personal income taxes and corporate income taxes);

Taxes on wealth(property taxes; death and gift taxes);

Taxes on activities(sales and excise taxes; social security taxes).

Because the power to tax is so weighty a matter, economists have developed several broad standards for judging the merits of a tax:

1.Equity. Tax burdens should be distributed justly.

2.Efficiency, Stability, and Growth. A tax should contribute toward improving resource allocation, economic stabilization, and growth in the total output of goods and services.

3.Enforceability. A tax should be adequate for its purpose and acceptable to the public, or else it will be impossible to enforce.

Taxes are considered to have three functions:

a) fiscal or budgetary, to cover government expenditure, to provide the public authorities with the revenue required for meeting the cost of defence, social services, interest payment on the national debt, municipal services, etc.;

b) economic, to give effect to economic policy, to promote stable economic growth, to influence the rate of economic growth of the nation;

c) social, to increase the economic welfare of the community, to lessen inequalities in the distribution of income and wealth.

Businesses and individuals are subject to many forms of taxes. The various forms of business are not taxed equally. The tax situation is simplest for proprietorships and partnerships; corporations or companies are treated differently.

21.2Answer the questions:

1. What is tax?

2. What are the main functions of taxation?

3. What are the principal types of taxes?

4. Are the various forms of business taxed equally?

21.3.Sum up the text in 10 – 12 sentences using the key words.

22.1.Read text 26.