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A tax is a charge that is paid by a person, firm or other legal entity to a government in order to fund public services.[1] Taxes are usually collected based on economic factors such as income levels or consumption habits. Some taxes are levied based on behaviour such as taxes on alcohol, smoking or pollution.[2] These taxes are often used to encourage or discourage certain behaviour like employing air pollution control devices.
Taxes come in a variety of different ways and apply to different areas:[3]
- Excise tax- A tax levied on specific goods or services.
- Income tax- A tax levied on the amount of income a person generates per annum.
- Pigovian tax- A tax levied on activities in the market that cause negative externalities such as a carbon tax.
- Sales tax- A tax levied based on ones consumption. This tax is levied when a good or service is purchased.
- Value added tax- A value added tax or VAT is a consumption tax similar to a sales tax. A VAT is dependent on the difference between the price that a seller paid for a good and the resale price that a consumer buys the good or service for.
- Property tax- A tax levied on the value of ones property.
- Tariff- A tax levied on imported goods.
References
- ↑ J.Black, N. Hashimzade, and G. Myles. (2009) "Tax." [Online], Available: http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref-9780199237043-e-3070?rskey=Iou2Cx&result=1, 2009 [Aug 8, 2016]
- ↑ Investopedia. "Taxes." [Online], Available: http://www.investopedia.com/terms/t/taxes.asp[Aug 13, 2016].
- ↑ A. Goolsbee, S. Levitt and C. Syverson. ‘’Microeconomics’’. New York: Worth Publishers, 2013, pp. 90.