Taxes are defined as money paid to the government. Governments all over the world collect taxes from their citizens as well as any entity, whether local or foreign, that wishes to do business in their soil.
Taxes are meant to fund public expenditures such as the enforcement of law and order, building of infrastructure (roads, school buildings, etc.), and provide public services (health care, education, etc.). The use of public funds, however, depends on the kind of government and the priority of each government.
Taxes come in many forms. A tax can be categorized depending on its relation to income and/or consumption (proportional, progressive, and regressive tax). A tax can also be categorized depending on whether it is collected directly or indirectly.
Direct taxes are those collected by the government straight from the individual or company paying for the tax. Indirect taxes, on the other hand are collected from someone other than the individual or company paying for the tax. An example of indirect tax would be value added taxes paid by consumers on top of their purchase, which is then remitted by the business to the government.
Taxes can also be categorized depending on the income source and/or purpose of taxation. Examples of common taxes levied by governments include income tax, capital gains tax, corporation tax, consumption tax, excise tax, expatriation tax, inheritance tax, property tax, sales tax, tariffs and toll. Note that the terms used for each kind of tax may vary for each government.
