TAX REVENUE: CHARACTERISTICS, TYPES AND EXAMPLES - DUDAS - 2024

The tax revenues are revenues collected by governments through taxes, the main source of revenue for the state. These can be extracted from sources such as individuals, public companies, commerce and royalties on natural resources.

They are defined as income collected from income and profit taxes, social security contributions, levies on products and services, payroll taxes, property taxes, and other taxes.

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Total tax revenue as a percentage of gross domestic product (GDP) indicates the proportion of what is produced in a nation that the government collects through taxes. It can be considered as an indicator of the level to which the resources of the economy are controlled by the government.

The tax burden is measured by taking the total tax revenue received as a percentage of GDP.

Inefficient tax collection is greatest in countries characterized by poverty, a large agricultural sector, and large amounts of foreign aid.

characteristics

Taxation is a key task in any country, as the capacity and responsibility of the State improves.

The government generally taxes its individual and corporate residents to help finance public works and services, as well as build and maintain the infrastructure used in a country. The tax collected is used to improve the economy and everyone who lives in it.

The level of taxes is used as an indicator of the state's capacity. Developed countries increase taxes and therefore can provide better services. At the same time, high taxation forces them to be accountable to their citizens, thereby strengthening democracy.

Tax collection

Just as there are different types of taxes, the way taxes are collected also differs.

Also, the agency that collects the taxes may not be part of the central government, but rather a third party licensed to collect the taxes.

The payment of taxes at the rates imposed by the State is mandatory. Tax evasion, which is the deliberate failure to pay full tax obligations, is punishable by law.

Changes in the level of taxation

The effect of a change in the tax level on total tax revenue depends on the product under investigation and, in particular, on the price elasticity of demand.

When goods are price inelastic, raising taxes will generate a small decrease in demand, which will not be enough to hurt the higher tax collected per unit. Therefore, total tax revenues will increase.

On the contrary, for elastic price products, an increase in the tax rate would lead to a fall in tax revenue.

Types

Tax systems vary widely between nations. It is important that both individuals and businesses carefully study the tax laws of a new location before earning income or doing business there.

Income tax

It is a tax that governments impose on income generated by individuals within their jurisdiction. It is a percentage of individual earnings filed with the federal government

By law, taxpayers must file an income tax return annually to determine their tax obligations.

Corporate tax

It is a tax by the government on the profit of a company. Money raised from corporate taxes is used as a nation's source of revenue to fund state programs.

The rules surrounding corporate taxes vary widely around the world, but must be approved by a country's government for enactment.

Sales tax

This is a tribute to consumption that the government imposes on the sale of services and products. A conventional sales tax is collected at the point of sale and at the hands of a retailer and passed on to the government.

Property tax

It is a tax on real estate, calculated by the local government, which is paid by the owner of the property. The tax is generally based on the property's asset value, including land.

Tariff

It is a tax that a country imposes on goods and services imported from other countries. They are used to restrict imports by increasing the price of goods and services purchased in another country, making them less attractive to domestic consumers.

Wealth tax

It is a tax on properties whose value exceeds an exclusion limit established by law, at the time of the owner's death. Only the amount that exceeds that minimum threshold is subject to tax.

It is calculated based on the fair market value of the estate, rather than what the decedent originally paid for their assets.

Example

United States tax revenue

About 48% of federal revenue comes from individual income tax, 9% from corporate income tax, and another 35% from payroll taxes that fund social security programs. The rest comes from other kinds of sources.

The federal government raised revenue of $ 3.3 trillion in 2017, equivalent to approximately 17.3% of GDP. In the last 50 years, federal revenues have averaged 17.3% of GDP.

Individual tax

Income tax has been the largest source of federal revenue since 1950, accounting for 8.3% of GDP in 2017.

In recent years, income from this tax increased to 9.9% of GDP in 2000, at the peak of the economic boom of the 1990s. They then fell to 6.1% in 2010, after the Great Recession of 2007-2009.

Corporate tax

Corporate income tax is a source of income that has been trending downward. They have fallen from an average of 3.7% of GDP in the late 1960s to an average of just 1.7% of GDP in the last five years.

Payroll tax

Payroll taxes on wages and earnings that fund social security make up the majority of income from social security programs.

In addition, there are the payroll taxes for the retirement system, the unemployment insurance program, and the federal workers' pension contributions.

Other sources

The federal government also collects property and gift tax revenue, customs duties, Federal Reserve System profits, and various charges and fees.

References

1. Wikipedia, the free encyclopedia (2019). Tax revenue. Taken from: en.wikipedia.org.
2. OECD Data (2019). Tax revenue. Taken from: data.oecd.org.
3. Julia Kagan (2019). Taxes Definition. Investopedia. Taken from: investopedia.com.
4. Debt (2019). Types of Taxes. Taken from: debt.org.
5. Tax Policy Center (2019). What are the sources of revenue for the federal government? Taken from: taxpolicycenter.org