Total revenue from direct and indirect taxes given as share of GDP in 2017[1]

A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or national),[2] and tax compliance refers to policy actions and individual behaviour aimed at ensuring that taxpayers are paying the right amount of tax at the right time and securing the correct tax allowances and tax reliefs.[3] The first known taxation took place in Ancient Egypt around 3000–2800 BC.[4] A failure to pay in a timely manner (non-compliance), along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labor equivalent.

Most countries have a tax system in place, in order to pay for public, common societal, or agreed national needs and for the functions of government. Some levy a flat percentage rate of taxation on personal annual income, but most scale taxes are progressive based on brackets of annual income amounts. Most countries charge a tax on an individual's income as well as on corporate income. Countries or subunits often also impose wealth taxes, inheritance taxes, estate taxes, gift taxes, property taxes, sales taxes, use taxes, payroll taxes, duties and/or tariffs.

In economic terms, taxation transfers wealth from households or businesses to the government. This has effects on economic growth and economic welfare that can be both increased (known as fiscal multiplier) or decreased (known as excess burden of taxation). Consequently, taxation is a highly debated topic by some, as although taxation is deemed necessary by general consensus in order for society to function and grow in an orderly and equitable manner through the government provision of public goods and public services,[5][6][7][8] others such as libertarians and anarcho-capitalists are anti-taxation and denounce taxation broadly or in its entirety, classifying taxation as theft or extortion through coercion along with the use of force.

  1. ^ "Total tax revenues". Our World in Data. Retrieved 7 March 2020.
  2. ^ Charles E. McLure Jr. "Taxation". Britannica. Retrieved 3 March 2015.
  3. ^ HMRC, About compliance checks, CC/FS1a, accessed 31 January 2022
  4. ^ Cite error: The named reference :1 was invoked but never defined (see the help page).
  5. ^ Sciaudone, Christiana; Niser, Lisa; Oct 24, E. A.; 2022; Am, 8:57. "Why Do We Pay Taxes?". Business Insider. Retrieved 31 October 2022.{{cite web}}: CS1 maint: numeric names: authors list (link)
  6. ^ "Why it matters in Paying Taxes - Doing Business - World Bank Group". Retrieved 31 October 2022.
  7. ^ "Why tax matters". Tax Justice Advocacy. Retrieved 31 October 2022.
  8. ^ "The Importance Of Taxes". Retrieved 31 October 2022.

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