Basic Overview of Taxation

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Taxes are mandatory charges that people and businesses have to pay to finance the state, they are the main source of income for the state and the main instrument for funding its territorially defined state and other (supranational) tasks.

In short, no taxes mean the state cannot function, as it would not have the funds to finance the construction of infrastructure (roads, ports, airports, electricity), provide public services in health, education, defense, social protection systems (unemployment, disability benefits or industrial accidents).

The key differentiator to other public charges is that the payment of taxes in principle does not establish an entitlement to compensation. The tax levy is imposed on the debtor without regard to its potentially conflicting will. In addition, tax resistance is not allowed when a taxpayer refuses on grounds of conscience, if say taxes are to be used for war purposes.

Because taxes are not always paid voluntarily, there are disobedience consequences for unscrupulous taxpayers which include delay penalty, fine, or imprisonment. These can be used by state authorities for the forced implementation of taxation.

Sometimes, the imposition of tax is based on the need to discourage the purchase of certain products or conversely to encourage certain economic activities.

As a source of revenue for kings and princes, taxes played a minor role in the early Middle Ages. On the other hand, the necessary administrative resources were lacking to apply a tax, because the records of citizens and property were outdated or simply not available.

The principle of uniformity of taxation is a consequence of the general principle of equality, which also follows from the fundamental rights. Uniformity of taxation is not only a respected principle but is also relevant to the uniform application of these laws. In particular, it may not come to a lack of enforcement.

It should however be noted that not every difference in interpretation of a provision by the authorities or courts translates to illegality or lead to the violation of the uniformity principle. Tax laws are not always set into force retroactively.

Taxes can be used with three different purposes such as the application of a tax to meet a public need indirectly. That is, what is produced is collected and the recovery is applied to finance expenditure of various public services.

Extra-tax purposes relates to the application of a tax to meet a public need or public interest directly. The classic example is the tax on cigarettes and alcoholic beverages (sin taxes). Mixed purposes: the purpose of joint search for the two purposes above.

Taxable event is an event whose realization, in accordance with the law, produces tax liability. These are facts common to obtain taxable income, the sale of goods and services, ownership of property and ownership of economic rights, the acquisition of property and rights by inheritance or donation.
 
Subject liability refers to the legal obligations of a natural or legal person to comply with tax requirements. It distinguishes between taxpayer, and the legal responsibility of the taxpayer or substitute to comply with material or formal obligations.

 

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