Taxation relates to the policies, regulations, and processes involved in deciding how much each citizen, resident, and business should contribute to funding government activities (i.e., tax policy). It is also about how these contributions should be collected from citizens, residents, and businesses (i.e., tax administration). It also discusses how society ensures that each citizen, resident, and business contribute their fair share as determined by the policies and regulations set by the government. Taxes fund the government’s operations, programs, and activities (i.e., fiscal policy). In this context, the government’s primary business is delivering public goods, services, infrastructure, and security that improve people’s living conditions.
Tax is the mandatory contributions we all make to the government monthly, quarterly, or annually as the law mandates. The amount of tax we pay is not based on the value of the public goods and services we receive from the government. Instead, it is based on citizens’, residents’, and businesses’ incomes, wealth, asset value, and the mandated tax rate for each type of income source.
We all want a safe, secure, and quality life. Essential government services improve our living conditions and quality of life. The government provides vital services such as electricity, transportation, telecommunication, healthcare, education, community policing, and national defense to make our lives better and more secure. Where does the government, as an embodiment of society, get the resources needed to pay for these services? In many developed and developing countries, the government’s primary revenue source to fund the provision of these essential goods and services is taxes paid by citizens, residents, and businesses.
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