wealtheducation-what_are

What are Taxes?

Taxes are monies collected by governments around the world for the benefit of reinvesting into the country's economy.

Taxes can come in many forms. Most common of all is income. Whenever a person earns an income, he is indebted to the country he earns an income in, as such he is required by law to pay income tax to the country he earns his income in.

Another form of income is when companies set up businesses in the country of origin and provides products and services for profits. When this happens, the profits these companies earns are taxable. It is usually called corporate taxes.

Other form of taxes includes goods and services tax, road tax, liquor tax, cigarette tax, etc.

Governments around the world rely on taxes to sustain first of all the country and economy. Second of all, it is used to stimulate its economy when needed in a bad economic situation. Therefore, taxes to governments are income and revenue as profits it is to businesses.

In a good economic situation, governments collect these taxes and place most of them in reserves. It is only when the country's economy is in need of help, that governments will use this reserves to spend and help stimulate the economy.