Finance Guide

Decide what to tax and how much to tax are among the most sensitive economic decisions a government can make. Taxing a good or activity essentially raises the cost of it from the perspective of the tax-payer, providing a disincentive that may affect decisions about whether to continue purchasing the good, engaging in the activity or affect the degree to which the tax-payer does so. These decisions can be enormously controversial politically. Indeed, whether taxes should be raised or lowered is often at the forefront of political campaigns.

In most countries, government raise much of their revenue by taxing the income of their citizens. Usually, a graduated tax is imposed, which rises as a citizen’s income rises. Graduated taxation systems feature a number of varying tax rates. As taxable income crosses a number of threshold levels, the new (and usually higher) tax rate will kick in, meaning that all income above the threshold levels is taxed at the new rate. This can mean that a person with a high income, which crosses a number of taxation value thresholds, maybe be paying tax on his or her income at several different tax rates.

Taxation rates are also applied to other kinds of taxes such as Value Added Tax, but it is more common for these taxes to be single static values rather than graduated in nature.

In most developed countries, income tax is the primary means governments have of raising revenue for themselves. Since it is paid by almost everyone, it also tends to be the most politically sensitive tax and arguments about its appropriate level frequently feature in political debates.

In almost all cases, income tax is applied in a series of graduated bands, meaning that as a citizen’s income rises, his income above certain threshold values would be taxed at a gradually increasing rate. At very high incomes, it is even possible that the majority of any income gains a person benefits from will go to the government rather than to the income earner.

The existence of income tax necessitates an elaborate system of reporting and checking through which citizens declare their annual income to the government and those declarations are scrutinised to make sure that they are accurate. Penalties for untruthfulness or evasion of tax responsibilities include fines and imprisonment. In some cases, income tax responsibilities are handled by employers, who deduct the appropriate amounts from their employee’s wages before the employee receives them and forward this money to the government. In this context, it may not be necessary for the employee to file a personal tax return with the government because it will all be taken care of automatically.

Car parking fines are fines levied by the government, or agencies contracted by the government, on motorists who park their vehicles in a way which is non conformant with the rules and regulations prevailing in a given area. Fines can be imposed either by police or by traffic wardens whose sole job function it is to attend to such things. In some cases, private companies may contracted by government agencies to carry out traffic policing duties.

Fines may be imposed if a motorist parks a vehicle in a place where parking is never acceptable, for example because doing so blocks a vital access way. Fines may also be imposed if a motorist parks a vehicle in a place where parking is acceptable without a valid ticket which grants him or her the right to do so during the relevant time.

Once a fine is imposed, the motorist involved usually has a certain amount of time in which to pay it. Failure to do so may result in further fines or court action.

Motorists can usually appeal a parking fine if they feel that it was imposed in error or that there was extraordinary circumstances which made violation of the parking regulations unavoidable. An appeal process will usually eventually result in a court hearing.

Social security is the name given to an economic support service provided by some governments to their citizens who are experiencing financial adversity of various types. Other countries provide similar services under different names. Typically, a social security system makes regular payments to citizens who meet the qualifying criteria for assistance. In order to meet the criteria, the citizens usually have to be suffering economic distress of some sort, such as that arising from unemployment, persistent illness or old age. Some social security systems involve all citizens making mandatory contributions to a social security fund maintained by the government. In this case, social security could be regarded as a mandatory form of insurance. Not all forms of financial assistance available under social security require payments to have been made in advance.

Since assistance provided under social security is provided only to those who meet certain criteria, there must obviously be some validation process to confirm that the citizens applying do, in fact, meet the criteria required. This validation may be done at the time assistance is applied for and recurrently while it is being received. If a claim for financial assistance is found to be fraudulent, the assistance will, of course, be terminated and the person involved may well be subject to prosecution.

The term tax avoidance is usually used to describe the practice of tax-payers using legitimate means to pay less of their money in tax than they would otherwise have to. It does not usually encompass behaviour which avoids the paying of taxes by means outwith the law, which is more often referred to as tax evasion.

Tax avoidance is extremely widespread, particularly among the wealthy. It is, of course, perfectly natural for tax-payers to wish to keep as much of their own money as possible and to seek out ways to do it. In most cases, tax avoidance will be facilitated by a professional accountant. Few ordinary tax-payers have the expert knowledge required to understand the intricacies of the tax system so well that they can make judgements about the best ways to avoid paying tax. Successful tax avoidance is usually accomplished through figuring out loopholes in the tax system and exploiting them so as to minimize the tax burden. The details of what can be done to avoid taxes naturally vary greatly from one country to another, since each country has its own separate tax system with unique features of its own.

Tax avoidance is not simply a personal thing but can also be performed by corporations.