What exactly is taxation? Taxation is an unavoidable administrative charge or a tax levied on a taxpayer by some voluntary government agency in order to finance various public welfare activities and government spending. Adversely, a refusal to pay, evasion of or non-payment of tax, and criminalization of the activity are punishable by law. While the exact meaning and scope of taxation are debated among economists, most opinion polls agree that taxation is typically viewed as an obligation of taxation, with little contribution of choice to individual action.
What kinds of taxes are there? There are many different types of taxes. The major ones are income, sales, property, personal property, estate, Medicare, Medicaid, Social Security, Unclaimed Debts, and Excise Taxes. In Australia, there are also some common taxes which are included in the system known as General Excise Taxes. These include Excise Tariff, Impostitis Quota, and Pet Law Tax.
Among different types of taxes, two types of taxes have gained the most popularity in recent years: Goods and Services Tax and Income Tax. Goods and Services Tax (GST) is charged when a product is purchased and based on the proportionate value of the items sold. The rate of this tax is fixed and is usually exempt from federal income taxation.
High-income earners also have their share in the taxing process. Taxation on high-income earners’ incomes is called graduated tax system. The first level of taxation is called the foundation level and the rate of taxation increases according to the net amount of income over that basis. The second level of taxation is normally referred to as threshold tax and is charged only on income above the foundation level.
On the other hand, indirect taxes are charged on production or consumption of a product or service. Examples of indirect taxes are customs duty, value added tax, value derived through lease, miscellaneous taxes, and property taxes. On the other hand, direct taxes are collected by governments when a product is purchased. Examples of direct taxes are income tax, sales tax, and property tax. When you are buying a car, your indirect tax is reflected in the price you paid for that car.
If you want to minimize your tax burden, you must learn about all the applicable tax rates and exemptions. This includes exemptions which are not refundable. You can ask the help of an IRS agent who will give you information about exemptions. While paying taxes, you must understand that all indirect taxes should be added to your total income and not passed on to the government. In this manner, you will be able to maximize your tax refunds.