Different types of taxes
The most significant supply of state revenue is taxes today. Taxes are an obligatory payment which every individual reaching the assessable limits needs to pay. They are normally imposed with the aim of raising funds by the government.
Taxes have been variously grouped as:
- Progressive tax;
- Proportional Tax;
- Progressive tax;
- Regressive tax;
Progressive tax functions of the principle of increasing rates of taxation with every increase in income. So, if one hand, if the taxation rates rises with the increase in income, it is known as progressive taxation. Examples of progressive taxes are Wealth tax, Estate duty, Gift tax and Income tax.
Irrespective of the size of the income the same rate of taxation is levied. Under Proportional taxation, people from all income groups have to pay the same percentage of their revenue as tax. Examples of proportional taxes here in India are commodity taxes such as- Union excises, custom duties and sales tax.
A tax is understood to be regressive when its load falls more seriously on the underprivileged than on the wealthy. It is the just the contradiction of a progressive tax. No educated management obliges a tax in which, as revenue augments, the rate of taxation is lessened. That would be obviously unfair. But there are more than a few taxes on goods whose load rests chiefly on the underprivileged. The Indian salt tax was considered as a regressive tax, as it pushed more seriously on the underprivileged than on the prosperous.
Degressive taxation is a system when the upper incomes do not make an appropriate sacrifice, or when the load obligatory on them is comparatively less. This will take place when a tax is just vaguely progressive, for example-, when the speed of development is not sufficiently spiky. A tax can be progressive up to a perimeter ahead of which the equal rate is imposed. In such a situation, there may be inferior comparative sacrifice for the higher revenue groups than for the lesser incomes.
One more method in which a degressive tax might take place is when the uppermost proportion is laid down for that particular kind of revenue on which it is projected to put forth most weight; and from this position onwards, the taxes is implied rationally on upper incomes and decreasingly on lesser incomes, declining to zero on the poorest income groups.