Tax

Tax collectorPieter Brueghel the Young man.

The tax is a kind of tribute (generally pecuniary obligations in favor of the tax creditor) governed by public law, which is characterized by not requiring a direct or determined consideration by the tax administration (tax creditor).

In most legislations, taxes arise exclusively from the "tax power of the State" which becomes the creditor. Taxes are generally mandatory charges for individuals and businesses. A guiding principle, called "contributory capacity", suggests that those who have more should contribute more to state financing, to consecrate the constitutional principle of equity and the social principle of freedom.

The main objective of taxes is to finance public spending: construction of infrastructures (transportation, energy distribution), provision of public health services, education, citizen security, police, defense, social protection systems (retirement, unemployment benefits, disability), etc.

Sometimes, at the base of the establishment of the tax there are other causes, such as dissuading the purchase of a certain product (for example, tobacco) or encouraging or discouraging certain economic activities. In this way, the tax figure can be defined as a forced pecuniary levy for those who are in the taxable act.

The regulation of taxes is called the fiscal system or taxation.

Total income from direct and indirect taxes and social contributions expressed as a percentage of GDP in 2017.

History

Egyptian peasants confiscated for not paying taxes. (Ancient Egypt, Age of Pyramids)

The earliest known system of taxation 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 the corvée and the tithe. The corvée was forced labor provided to the state by peasants too poor to pay other forms of taxes (labor in ancient Egyptian is synonymous with taxes). Records from the time document that the pharaoh would make a biennial tour of the kingdom, collecting tithes from the people. Other records are granary receipts on limestone flakes and papyrus. Primitive taxes are also described in the Bible. In Genesis (chapter 47, verse 24 - the New International Version), it says "But when the harvest comes, give one-fifth to Pharaoh. The other four fifths you can save as seed for the fields and as food for yourselves and your homes and your children". Samgharitr is the name mentioned for the tax collector in Vedic texts. In Hattusa, the capital of the Hittite Empire, grain was collected as a tax from the surrounding lands and stored in silos as a token of the king's wealth.

In the Persian Empire, Darius I the Great introduced a regulated and sustainable tax system in 500 BC. the Persian tax system was adapted 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 one was evaluated according to its supposed productivity. It was the Satrap's responsibility to collect the amount owed and send it to the treasury, after deducting his expenses (expenses and the power to decide precisely how and from whom to collect the money in the province offer the greatest opportunity for the wealthy to accumulate profits).. The amounts demanded from the different provinces gave a vivid image of their economic potential. For example, Babylon was rated for the most and for a surprising mix of products; 1,000 talents of silver and a four-month supply of food for the army. India, a legendary province for its gold, was to supply gold dust equivalent in value to the large quantity of 4,680 talents of silver. Egypt was known for the wealth of its crops; it was to be the breadbasket of the Persian Empire (and, later, the Roman Empire) and was to provide 120,000 measures of grain in addition to 700 talents of silver. This tax was levied exclusively on satrapies based on their land, productive capacity, and tax levels.

The Rosetta Stone, a tax concession granted by Ptolemy V in 196 B.C. C. and written in three languages "led to the most famous decipherment in history: the decipherment of hieroglyphics".

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

Trends

Numerous records of government tax collection in Europe from at least the 17th century are still available today. But tax levels are difficult to compare with the size and flow of the economy, since production figures are not as readily available. Government spending and revenue in France during the 17th century rose from around 24.30 million pounds in 1600–10 to about 126.86 million pounds in 1650–59 to about 117.99 million pounds in 1700–10 when debt Public revenue reached £1.6 billion. In 1780-1789, it reached 421.50 million pounds. Taxes as a percentage of production of final goods may have reached 15-20% over the century XVII in places like France, the Netherlands, and Scandinavia. During the war-filled years of the 18th century and early 19th century, tax rates in Europe increased dramatically as the war it became more expensive and governments became more centralized and adept at collecting taxes. This increase was greatest in England, with Peter Mathias and Patrick O'Brien finding that the tax burden increased by 85% over this period. Another study confirmed this number, finding that tax revenue per capita had increased nearly sixfold during the 18th century, but that Steady economic growth had caused the actual burden on each individual to only double during this period before the industrial revolution. Effective tax rates were higher in Britain than in France in the years before the French Revolution, twice as high as per capita income, but they were mostly placed on international trade. In France, taxes were lower, but the burden fell mainly on landlords, individuals, and internal trade, and therefore created much more resentment.

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

Modalities

In monetary economies prior to trust banking, a critical form of taxation was seigniorage, the tax on the creation of money.

Other obsolete forms of tax include:

• Escuage, which is paid instead of military service; strictly speaking, it is a commutation of a non-tax obligation rather than a tax as such, but which functions as a tax in practice.
• Tallage, a tax on feudal dependents.
• Tenth, a payment similar to a tax (one tenth of the profits or agricultural products), paid to the Church (and therefore too specific to be a tax in strict technical terms). This should not be confused with the modern practice of the same name, which is normally voluntary.
• Helps (feudals), a type of tax or owed that paid a vassal to his lord during the feudal period.
• Danegeld, a medieval territorial tax originally collected to pay for Danish incursions and then used to finance military expenditures.
• Carucage, a tax that replaced the Danegeld in England.
• Fiscal exploitation, the principle of assigning responsibility for tax collection to citizens or private groups.
• Socage, a feudal tax system based on land income.
• Burgage, a feudal tax system based on land income.

Some principalities taxed windows, doors or cabinets to reduce consumption of imported glass and hardware. Cabinets and dressers were used to evade taxes on doors and cabinets. In some circumstances, taxes are also used to enforce public policies, such as the congestion charge (to reduce road traffic and encourage public transport) in London. In tsarist Russia, taxes were imposed on beards.

Today, one of the most complicated tax systems in the world is found in Germany.^{[citation needed]} 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, spending €3.7 billion to collect income tax. In the United States, the IRS has about 1,177 forms and instructions, 28.4111 megabytes of the Internal Revenue Code which contained 3.8 million words as of February 1, 2010, numerous tax regulations in the Code of Federal Regulations, and material complementary in the Internal Revenue Bulletin. At present, governments in more advanced economies (i.e. Europe and North America) tend to rely more on direct taxes, while developing economies (i.e. several African countries) rely more on direct taxes. indirect.

Purposes

• Tax purposes: it is the application of a tax to meet a public need indirectly. That is, it is collected and produced from the collection (money) is applied in expenses to finance various public services.
• Extrafiscale fines: it is the application of a tax to meet a public need or public interest directly. One example is taxes on cigarettes and alcoholic beverages.
• Mixed ends: it is the purpose of joint search of the two previous purposes.

Tax Elements

Tax paymentJaumont limestone, II - III century, Metz, preserved in Musée de la Cour d'Or.

• Imponible fact: That circumstance whose realization, according to the law, originates the tax obligation. It is commonplace to obtain an income, the sale of goods and the provision of services, property and the ownership of economic rights, the acquisition of property and rights by inheritance or donation.
• Passive subject: the person who must, is the natural or legal person who is obliged by law to comply with tax benefits. It distinguishes between taxpayers, to whom the law imposes the tax burden, and legal liability or substitute for the taxpayer who is obliged to comply materially or formally with the obligation.
• Active subject: it is the administrative entity directly benefited by the tax relief, who makes the income of the respective tax in his budget. In the Colombian case, for example, the active subjects are administrations of a national, departmental, municipal or district nature, to which the creation of the tribute defines in one case or another as recipients.
• Imponible basis: it is quantification and valuation of the taxable fact and determines the tax obligation. This is a lot of money, but it can also be other signs, such as the number of people living in a house, liters of gasoline, liters of alcohol or number of cigarettes.
• Type of levy: is the proportion applied on the taxable basis in order to calculate the levy. This ratio can be fixed or variable.
• Tax fee: That amount that represents the tax and can be a fixed amount or the result of multiplying the tax rate by the taxable base.
• Tax debt: it is the final result after reducing the quota with possible deductions and increasing with possible surcharges, which must be impossed (paid) to the active subject according to the rules and procedures established for this purpose.

Fundamental principles of taxes

One of the fundamental concerns of the Public Treasury has been to determine the criteria and principles that must govern a tax system, so that it can be qualified as optimal. However, there is no agreement on what these principles should be, the most widespread are:

• Principle of economic efficiency: it is that tax performance should be as much as possible, and its collection should not be tax.
• Principle of justice: it is that the inhabitants of a nation must contribute to the support of the government in a proportion as close as possible to their economic abilities and to the observance or contempt of this maximum depends on the equity or lack of equity in the imposition.
• Principle of certainty: any tax must possess fijeza in its essential elements (object, subject, exemptions, rate, period of payment, infractions and sanctions), to avoid arbitrary acts of the authority.
• Principle of comfort or administrative simplicity: any tax must be collected at the time and in the way in which the taxpayer is most likely to obtain its payment. It is necessary to check how the administration costs of a fiscal system compensate for expected improvements in efficiency or equity.

Tax classes

Tax rates and tax rate

Maximum and minimum tax rates in OECD countries, 2005.

Taxes are generally calculated based on percentages, called the tax rate, tax rates or aliquots, on a particular value, the taxable base. It distinguishes:

• Proportional or flat taxwhen the percentage is not dependent on the taxable base or the income of the individual subject to tax.
• Progressive tax, the higher the profit or income, the higher the percentage of taxes on the basis.
• Regressive tax, the higher the profit or income, the lower the percentage of taxes to be paid on the total tax base.

Progressive taxes reduce the burden on lower-income people, since they pay a smaller percentage of their earnings. This can be seen as a good thing in itself or it can be done for pragmatic reasons, as it requires less registration and complexity for people with less business. Sometimes a tax whose effects may be more favorable or unfavorable on people with lower incomes is described as a progressive or regressive tax, but this informal use of the term does not allow a clear definition of regressivity or progressivity.

The discussion about the progressivity or regressivity of a tax is linked to the tax principle of “equity”, which in turn refers to the principle of “tax capacity” or contributory. The Constitution of the Argentine Nation (art. 16) reads: "Equality is the basis of taxes and public charges", which the doctrine understood as "equality of efforts" or "equality between equals". This gives rise to the concept of horizontal and vertical equity of the tax. Horizontal equity indicates that, for the same income, consumption or wealth, taxpayers must contribute to the treasury in equal measure. Vertical equity indicates that the greater the income, consumption or wealth, the greater the contribution must be made, that is, at higher rates, to achieve "equality of effort". Based on this last concept, the use of the term “regressiveness” has become widespread to qualify taxes that require a greater tax effort from those who have less tax capacity. This is the case of VAT, which, being a flat tax in its rate, by taxing basic necessities imposes a greater tax effort on the lower classes.

Direct and indirect taxes

Cover of the work The wealth of nationsAdam Smith, 1776.

According to collection or administrative criteria, taxes have traditionally been divided into two classes: direct and indirect. Direct taxes are characterized because they tax the obtaining of income or the possession of assets and there is a direct and periodic relationship between the Tax Administration and the taxpayer; such as income taxes, wealth taxes, inheritance tax, taxes on the transfer of goods free of charge, taxes on Real Estate, on the possession of vehicles, animals, etc.

On the contrary, indirect taxes tax the use or consumption of income, as well as certain patrimonial transfers that do not take place within commercial traffic and there is an indirect relationship between the taxpayer and the administration. The most important indirect tax is the value added tax (VAT), which constitutes an important part of tax revenue in many countries around the world. Historically, this is the case of the Castilian alcabala of the Old Regime and of the consumos of the XIX century..

Objective and subjective taxes

Objective taxes are those that tax a manifestation of wealth without taking into account the personal circumstances of the subject who must pay the tax, on the contrary, they are subjective taxes, those that when establishing the tax do take into account the circumstances of the person who has to pay for it. A clear example of a subjective tax is the Income Tax, because normally in this tax various circumstances of the person are modulated, such as their disability or the number of children to establish the fee to be paid, on the contrary, the tax on beer It is an objective tax because it is established based on the liters of beer produced without taking into account the personal circumstances of the taxpayer.

Royal taxes and personal taxes

Depending on the taxpayer, taxes are divided into personal and real. The first fall on the total income or patrimonial group whose ownership is referred to a physical or legal person, and also adapt to the personal payment capacity of the taxpayer by taking into account his personal or specific circumstances; for example personal income tax, corporation tax, inheritance and gift tax or wealth tax. In this sense, in the case of two taxpayers who obtain the same level of income, the one with greater family responsibilities or a more adverse personal situation will pay a lower amount for personal income tax.

Real taxes levy separate manifestations of economic capacity without relating it to a particular person. Taxes become personal when they tax a manifestation of economic capacity placed in relation to a specific person.

An income tax can be real if it is separately taxed on wages, business profits, rents, or interest earned. However, this tax will be personal when it falls on the whole income of a person. The non-resident income tax that is levied on income obtained by people in a country by people who are not residents of that country, is usually of a real nature, non-residents must submit a declaration of this tax for each income they get in the country.

Personal taxes can be subjectivized in an easier and more adequate way, by taxing a subject in a more complete way, but it does not have to be that way, for example we can adopt a tax on wages (and therefore real) that takes into account in your tax the family circumstances (number of children, physical disabilities etc) and therefore have a subjective nature.

Instant taxes and periodic taxes

In instant taxes, the taxable event is carried out sporadically at a certain moment in time, for example, the purchase of a property or receiving a donation from another person. In periodic taxes, the taxable event is prolonged indefinitely in time; in these cases, the legislator divides its duration in time into different tax periods. The income tax is levied on income, which is a continuous phenomenon, but the law taxes it annually.

Types of taxes

The OECD tax classification is as follows:

• Income tax (ISR), profits and capital gains
  • Individual income taxes, profits and capital gains
  • Corporate income tax, profits and capital gains
  • Other
• Contributions to Social Security
  • Workers
  • Entrepreneurs
  • Self-employed and employed
• Taxes on payrolls and labour
• Property taxes
  • Recurrent taxes on real estate
  • Periodical tax on net wealth
  • Taxes on inheritance, inheritance and donations
  • Taxes on financial and capital transactions
  • Non-recurrent taxes.
• Taxes on goods and services
  • Taxes on production, sale, transfers, lease and distribution of goods and services.
  • Taxes on specific goods and services
  • Taxes on use or permission for use or development of activities related to specific goods (licences).
• Other taxes
  • Exclusively paid for business
  • Other

Examples of Existing Taxes

• Added Value Tax or Added Tax (VAT): applies to items sold and, according to the product, varies the tax burden. In Spain it is 21 %, in Germany of 19 %, in Switzerland of 8 %. In Guatemala it is 12%. In Mexico, for example, it increased from 15 to 16 % (including border strips to the north and south of the country, where, until 2013, there was a preferential rate of 11 %). In Argentina it is 21 % (with few exceptions in some products). In Chile it is 19 %, in Peru of 18 %, in Paraguay of 10%, in Ecuador of 12 % and in El Salvador of 13 % (with certain aspects, such as public health or transport, free of this tax). In Uruguay, the basic rate is 22%, and the minimum rate of 10% (which encumbers the circulation of basic necessities and the provision of health services). In Venezuela it is 16%, in the United States it is different in each state, and it ranges from 5% to 8%, in Colombia it is 19%.
• Physical Income Tax (IRPF)
• Non-Resident Income Tax
• Tax on Societies (IS)
• Property Tax
• Tax on Insurance Premiums
• Provision of possession or use of vehicles
• Hydrocarbon Tax: applies to fuels.
• Successions and Donations Tax
• Onerosas Patrimonial Broadcasting Tax (Spain)
• Alcohol Tax
• Tobacco tax
• Taxes on the game
• Economic Activities Tax
• Taxes of the City Councils
• Tax on the alleged profit, an emergency tax in Argentina.
• Tax on Deposits in Cash (IDE,) in Mexico.
• Unique Tax (IETU) in Mexico.

Economic effects of taxes

The establishment of a tax implies a decrease in the disposable income of an agent, this can produce a change in the behavior of the economic agent. Regarding the effect on national income, the effect can be favorable or unfavorable according to the IS-LM model.

On the other hand, some taxes, by influencing the price of the products they tax, it is possible that the producers wish to pass the bill for the payment of the tax to the consumers, through an increase in prices.

Percussion

Taxes are paid by the subjects to whom the laws impose the corresponding obligations. This fact does not only have a legal meaning, since the payment of the tax imposes on the subject the need to have the liquid amounts to carry it out, which sometimes also involves the need to resort to credit in its various forms. All of this brings with it consequences for the economic behavior of the taxpayer and changes in the market.

Transfer or translation

Occurs when the subject de iure, that is, the subject obliged by law to pay the tax transfers to a third party (subject de facto) by raising of the price, the amount of the tax, so that he is compensated for the burden of the tax.

This is an economic effect and not a legal one, because the economic burden is transferred but not the tax obligation: whoever the State will coerce to collect will be the subject de iure and not the de facto, with whom it has no ties.

Incidence

It is given by:

• Direct Way: equal to percussion.

The subject of de jure is confused with the de facto subject, because the incidence is towards the subject thought of the norm because of its contributive capacity.

• Indirect Way: it is the same as translation.

The tax has an indirect effect on a subject.

Dissemination

• General phenomenon manifested by the slow, successive and fluctuating changes in prices, consumption and savings.
• Taxes together have a real and true effect on the economy of individuals.

Examples:

Direct taxes: we save less for paying the rent.

Indirect taxes: incite in the final price of the products: you can consume less.

Amortization

• One of the effects of taxes, which is not of a general nature but peculiar to the real taxes that permanently tax the credit of the capitals durablely invested and which, in a way different from the incidence, is called the repayment of the tax.

Taxes and other taxes

In most state tax systems, at least three types of taxes are distinguished: the tax, the rate and the special contribution.

There are three classic criteria to distinguish the tax from the rate:

• Means of financing: According to this criterion, taxes are the means of financing of Indivisible Public Services (those that cannot be determined the degree of benefit for those who enjoy it), and the Rates are the means of financing divisible public services (those that can be determined the degree of benefit of those who enjoy it). It is criticized that divisible public services are indistinctly financed by taxes or fees.
• Grade of benefit: According to this criterion, in the payment of the Tax there is no contracting by state, instead with the payment of Taxes if there is a contracting, no matter whether it is effective or potential.
• Cause: According to this criterion, the tax has as its cause the contributory capacity or rather the imposition of the taxable act, but the rate is caused by the effective or potential use of public services.