Law on Taxes: Guidelines for Taxpayers
What is the law on taxes?
Every country has a distinct set of laws with regards to taxes. The law on taxes is the rules and policies that oversee the tax process. The tax process involves charges on estates, transactions, property, income, licenses, and more and is established by the government. It is also the codified system of laws that describes government levies on economic transactions, commonly called taxes. Taxation also compromises duties on imports from foreign countries and all compulsory levies imposed by the government upon individuals for benefit of the state.
In Australia, there is a law on taxes. Companies and individuals may be responsible to pay taxes to local, state, and federal governments. Although there are many areas where taxes are being spent, in most cases it is to pay for public services and transfer payments. The federal government, through the Australian Taxation Office, collects income taxes, which are the most significant form of taxation.
The Area of Law on taxes
There are two main reasons why the law on taxes is continuously growing in complexity and constantly changing. The first one is that the tax code has been used increasingly more often for objectives other than to be used to increase revenues. The second reason is the way in which the tax code is amended.
Law on taxes also involves payment of taxes to four levels of government directly or indirectly. Indirect taxes are placed on products and services to be consumed, but are paid to an intermediary. Direct taxes are paid directly to the government and then are levied to things like land or any kind of property, and income.
Primary issues concerning law on taxes
There are certain issues concerning the law on taxes which governments all over the world are facing. The first issue is taxes on income and wealth or estates; the second is the taxation of capital gains.
Taxes on income and wealth or estates
An income tax is imposed on the income or earnings of individuals or businesses (corporations or other legal entities). There are different systems for this along with varying degrees of tax incidence. Tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. The main concept is not dependent on where the revenue is collected, but on price elasticity of supply and demand. Income taxation, as governed by law on taxes can be progressive, proportional, or regressive. When the tax is imposed on the income of companies, it is called corporate tax.
Taxation on Capital gains
Capital gain pertains to the profit from investments into capital assets. For instance, stocks, bonds, or real estate can sometimes exceed the original purchase price. If this occurs, investors will attain financial gain. On the contrary, capital loss happens if the proceeds from the sale of a capital asset are less than the purchase price.
The law on taxes in countries all over the world levy tax on capital gains of individuals or corporations, although relief may be available to exempt capital gains: holdings in certain assets such as significant common stock holdings, giving incentives for those in the entrepreneurship industry, or compensating for the effects of inflation.
Law on taxes: dealing with other types of taxes
Goods and Services Tax (GST)
Goods and services tax mostly involves goods and services registered that impose 10% Value Added Tax (VAT) on its supplies consumed in Australia which is implemented by the Federal Government. All goods and services registered for GST is entitled to include GST in the price that is charged to the customers for goods and services they purchase, which to the layman is referred to as sales tax.
Property taxes include residential, industrial, and commercial properties that are typically funded largely by taxes on land value by local government. Some state governments’ law on taxes on land values are intended for investors and primary residences of high value.
The Federal government of Australia implements excise taxes on products such as cigarettes, petroleum, and alcohol. This tax is also called a duty of excise special tax and is generally referred to as an inland tax on the sale, or production sale of specific goods and products.