A tax is simply a mandatory financial obligation or any other kind of legal levy imposed upon a taxpayer by an administrative body or government agency so as to finance various government programs and public expenditure. Evasion of or refusal to pay tax, and related crimes are punishable by law. Though not required by law, paying taxes is often viewed as the most moral thing to do, something to be proud of and a source of personal gain for many. Unfortunately, tax frauds are very widespread and the consequences of tax evasion can be far-reaching and long lasting.
The different kinds of taxes are regulated by the governments of the countries. The rates and types may vary from one nation to another. Examples of these include customs and excise duties, which are charged for importing or exporting goods. The central government levies central taxes and other fees and dues at the point of entry into a country. Quotas and internal tariffs are charged on imported goods.
Income, wealth and corporate taxes are considered as the main sources of tax revenues. However, there are two major categories of taxes: regressive and progressive. A regressive tax system is one in which higher incomes pass through lower tax brackets while progressive taxation system provides a base of upper income tax brackets with progressively lower rates thereafter.
India has a number of regressive taxation systems in place, such as the income tax and its component, the central Excise Duty. Excise duty is levied on importation of foreign objects, especially goods which are not indigenous to India. For example, if an American tourist buys a shirt made in India and later on decides to sell it back home, he will have to pay a certain amount of tax as tribute to India. Thus, the government collects income tax from tourists and imposes various kinds of customs and excise duty on imported goods to ensure that the country receives what it needs. By ensuring that the government gets the necessary revenues, it in turn ensures that there is sufficient allocation for the various social welfare programs of the country.
Progressive taxation systems are mostly proportional in nature and income tax, unlike regressive taxes, falls according to how much money is earned by an individual. The basic tax structure of India includes taxes on income and wealth, property taxes, value-added taxes (VAT), indirect taxes, customs, central Excise Duty, state excise duties, and value-added tax (VAT) on local production. Some states in India, including Kerala, Singapore, Andhra Pradesh, Karnataka, and Delhi, levy more local taxes than the national average. Some states in India, like Kerala, also levy personal taxes, apart from income and wealth tax. However, all these taxes are subject to federal level taxation and collection.
Direct taxes include customs, central Excise Duty, income tax, indirect tax, estate tax, and sales tax. These taxes are collected from individuals or companies by collecting the amount of money that they have brought into the country. The rate of direct tax may differ from state to state, while the proportion of indirect taxes and customs may differ from state to state. All these taxes need to be paid irrespective of whether the money is brought in from abroad or is sourced from the public.