Tax refers to a compulsory contribution to state revenue, levied by the government on workers' income and business profits or added to the cost of some goods, services and transactions. The purpose of taxation is to finance government expenditure. One of the most important uses of taxes is to finance public goods and services, such as street lighting and street cleaning. Since public goods and services do not allow a non-payer to be excluded, or allow exclusion by a consumer, there cannot be a market in the good or service, and so they need to be provided by the government or a quasi-government agency, which tend to finance themselves largely through taxes.
Summary of definition:
* It is invisible paying as all people of state pay taxes in different ways like levies. * It is compulsory to them who are eligible for direct tax. * It is used for purpose to common benefits of the country.
Classification of Taxes
Modern Tax systems comprise of many types of taxes. Proper classification of the sundry taxes is essential to understand the nature and significance of different taxes. Usually, taxes are classified on the basis of form, nature, aim and methods of taxation. The following classifications are common in all modern tax systems: DIRECT AND INDIRECT TAXES:
Direct tax and Indirect tax are defined by different economists and experts on public finance in different ways, based on different criteria like based on ‘shifting of tax, based on ‘the intention of the legislature or government’, based on the relation between the tax payer and the revenue authorities and based on the timing of appraising or striking the income of the tax payer. The most practical and convenient way to distinguish between direct and indirect taxes which are in conformity with “generally accepted view” of direct and indirect taxes. Corporation tax which is directly paid to the state may be called as direct taxes. On the other hand, taxes which affect the income and...