Tax - Attributes, Classification & Principle of Good Taxation

-
  • A tax is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state to fund various public expenditures
  • Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent
Two aspects of taxes
  1. A tax is a compulsory payment and no one can refuse to-pay it.
  2. Proceeds from taxes are used for common benefits or general purposes of the State. In other words, there is no direct quid pro quo involved in the payment of a tax.
Attributes of Tax
Tax Base
(Those people / entity liable to pay tax.
Ex: Person A: 1,00,00,000 incomes – 10% tax = 10,00,000, Person B: 60,00,000 incomes – 10% tax = 6,00,000. Total Tax Base is 16,00,000).
  • Tax base is defined as the income or asset balance used to calculate a tax liability, and the tax liability formula is tax base multiplied by tax rate.
  • The rate of tax imposed varies depending on the type of tax and the tax base total.
  • Eg. Base of excise duty is production of commodities.
Impact and Incidence of Taxation
(Incidence - where govt is levied, Impact – who feeling the Burdon)
[Ex: Direct tax - Impact & Incident same place (Income Tax on Person – Individual pay)
Indirect Tax - Impact & Incident different place (GST on Goods/Company – People pay)]
  • Incidence is the point where tax looks being imposed.
  • It is the event of tax imposition.
  • Impact is the point where the tax makes its effect felt.
  • It is the after effect of tax imposition.
Classification of Taxation
1.Proportional tax:
(Whatever price of Good, Same % of tax for all)
  • In case of proportional tax, the same rate of the tax is charged, whatever be the magnitude of the base on which it is levied.
  • For instance, if rate of income tax is 25 per cent whatever the size of income of a person, it will then be a proportional income tax. Likewise, if rate of wealth tax is 5 per cent, it will be proportional wealth tax.
  • Thus, in case of proportional tax it is the rate which is fixed and not the absolute amount of the tax.
2. Progressive tax
(More income More Tax, less income Less tax OR Rich paying more tax and poor paying less tax – Help in Redistribution of Income (Article (39))
  • In case of a progressive tax, rate of the tax increases as the amount of the tax base (income, wealth or any other object) increases.
  • The principle underlying a progressive tax is that greater the tax base, the higher the tax rate.
  • In India income tax, an important direct tax levied by the Central Government, is progressive.
  • Under progressive income tax, the richer person pays not only absolutely more tax but also a higher rate of the tax. Thus, the burden of progressive tax falls more heavily on the richer persons as compared to proportional income tax.
3. Regressive tax
  • A regressive tax is the opposite of a progressive tax.
  • In case of a regressive income tax, the rate is lowered as the income rises.
  • Thus, under regressive tax system, the burden of the tax is relatively more on the poor than on the rich.
  • A regressive tax is therefore inequitable and no civilized Government in the world today will levy such a tax.
Principle of Good Taxation System
(Canons of Taxation)
  1. Fairness
    • Horizontal equity.
    • Vertical equity.
  2. Efficiency
    • Efficiency of a tax system is its potential to affect or interfere the efficiency of the economy.
    • A good tax system raises revenue with the least cost on the taxpayers and least interference on the allocation of resources in the economy.
  3. Administrative Simplicity
    • It includes factors like computation, filing, collection, etc. of the taxes that all should be as simple as possible.
    • Simplicity checks tax evasion too.
  4. Flexibility
    • A good tax system has the scope of desirable modifications in it if there is any such need.
  5. Transparency
    • How much tax taxpayers are actually paying and what are they getting against it in the form of the public services should be ascertainable, i.e., the transparency factor.

Comments

Post a Comment

Popular posts from this blog

Indian Painting - Pre History

-
Image
    History and Evolution of Painting in India - An Overview India has a long tradition of artistic excellence and painting is one of the major mediums that has been used to express it. There is several evidence suggesting that painting flourished in India since ancient times. Archaeologists have found wall paintings in parts of India, which suggest that even the early historic man in India was engaged in activities of art and leisure The history of painting can be traced through the ancient and medieval period where the books were illustrated with paintings Then came the miniature style that dominated the Mughal and Rajput courts. With the coming of the Europeans, the art of painting and engraving took a western turn. Modern painters experimented with styles, colours and designs. Many Indian painters have gained worldwide recognition and are winning prizes and accolades for their vision. Principles of Painting The history of paintings can be known from primitive rock paintings of Bhim
Read more

Classification of Indian Paintings

-
Image
    Classification of Indian Paintings Indian Paintings have been broadly classified into two. Mural Paintings Miniature Paintings Mural Paintings The work on the walls or a solid structure are referred to as Murals. These have existed in India since ancient times and can be dated between 10th century BC and 10th century AD. The evidence of such paintings can be found at several locations in India. The beauty and the exquisiteness of mural paintings can be seen in places like Ajanta, Armamalai Cave, Ravan Chhaya Rock Shelter, Bagh Caves, Sittanavasal Caves and Kailash Temple in Ellora. Most of the mural paintings are either in natural caves or in rock cut chambers. The paintings follow a theme, the most common being Hindu, Buddhist and Jain. Mural paintings were also made to adorn any mundane premise. For e.g. Ancient theatre room in Jogimara Caves. Ajanta Cave Paintings One of the oldest surviving murals of Indian sub-continent, Ajanta caves were carved between 2nd century BC to 5th c
Read more

Folk Paintings

-
    Madhubani Paintings Traditionally done by the women of villages around Madhubani town (Bihar). It is also called Mithila Paintings. The paintings have a common theme and are usually drawn from religious motifs of the Hindus, including Krishna, Rama, Durga, Lakshmi and Shiva. The paintings are also made depicting auspicious occasions like birth, marriage and festivals. Flowers, trees, animals, etc. are used to fill any gaps in the painting. Traditionally, these were painted on walls using rice paste and vegetable colours on a base of cow dung and mud. With time, the base changed to handmade paper, clothes and canvas. Since there was no shading, the paintings are two-dimensional. Some of the common features of these paintings include double line border, bold use of colours, ornate floral patterns and exaggerated facial features. Since the art has remained confined to a specific geographical area, it has been given GI (geographical indication) status. Pattachitra Painting A traditiona
Read more