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.

Corporation Tax is a tax levied on the profits of incorporated companies. In most countries, companies must file accounts with the government each year, reporting their income, expenditures and profits over the 12-month period. Typically, there are penalties, including fines and even imprisonment if the directors of the company fail to file accounts in a timely and accurate fashion.

Corporation tax is usually levied as a standard single rate, rather than in a graduated series of rates as is common with income tax. It is often the case that some companies are charged at special rates, however. For example, governments may decide that they want to support the growth of small companies and so charge them a lower rate of corporation tax than large companies. Companies which exist only to invest in other companies, such as unit trusts for example, are often also charged corporation tax at a lower rate.

In most legal dispensations, companies are allowed to offset many costs incurred in the course of doing business against their taxable income before corporation tax is charged on it. For example, money spent on research and investment can often be written off against tax liabilities in whole or in part.

Public transport fines are fines imposed by a government or government agency in response to a violation of the laws or regulations governing public transport. The most obvious public transport-related offence is that of travelling by means of public transport without a proper ticket. In many cases, it is very easy for a person to board a train without purchasing a ticket and the number of ticket inspectors may not be sufficient to reliably detect those who try and do this.

Other offences on public transport systems for which fines may be levied include : using the emergency stop facilities of the vehicle when there is not a genuine case of emergency; smoking in an area which has been designated as a non-smoking area; dropping litter on the public transport vehicle or station; offensive behaviour to staff or other passengers; trespassing into areas not open to members of the general public.

In some areas, drinking from bottles may be banned on public transport; in others, drinking alcohol in any form may be prohibited. Fines will be imposed for failure to follow these regulations.

After receiving a fine, the person involved will usually not have to pay right away, but will be given a certain amount of time in which to make the payment.

Inheritance tax is a tax levied on the assets inherited by one person from another following the death of the original owner. Normally, it only applies when assets inherited are fairly substantial in value so that most people will never have to worry about inheritance tax. In cases where assets other than money are being inherited, those assets will have to be valued so that they can properly be taxed. Sometimes, in inheritance tax settlements, the government is willing to accept assets in lieu of cash. For example, it is not uncommon to hear of stately homes which gave up an Old Master painting to the care of the government to settle an inheritance tax bill.

When inheritance tax is applied, there is typically a certain amount that can be transferred without paying tax. Above that threshold value, the tax will be applied. There are usually cases where bequests are exempt from inheritance tax. For example, when assets are transferred to a spouse, no tax need be paid. Other exemptions may apply to charitable bequests. Dispositions of assets in the years preceding death can also be subject to inheritance tax so giving it all away before the end is not necessarily enough to escape the tax man’s clutches.

Tariffs are a form of tax levied on goods imported into the country. They may be charged at an absolute amount or as a percentage of the total price. Tariffs are one of the oldest forms of taxation, in use well before more modern forms of tax such as income or corporation tax. They were particularly popular with governments in the 17th and 18th centuries when the mercantilist doctrine was dominant in economic thought. Mercantilism held that money flowing out of the country was bad, and money flowing into the country was good. Naturally, according to this interpretation, importing goods was a bad thing, because it caused money to flow out of the country. Since tariffs make imported goods relatively more expensive to domestic consumers, they were widely favoured.

In modern times, the use of tariffs is quite rare. A web of international agreements has meant that trade between nations is far freer than it was before. When tariffs are imposed, it is almost never for the purpose of raising revenue per se, but because the tariff-imposing nation feels that the other country has acted unfairly in some way in its economic policies, perhaps, for example, by subsidising the industry which is producing the imported goods, meaning that it is not subject to normal economic restraints.