Any given tax system is used by the government to aid revenue which in return is used as a public administration expenditure. Taxes which are imposed upon the people, business organizations and other internal or external trades are imposed with the help of a system, which is basically a mathematical cum accounting formula. A system or a manner in which a proportional rate of tax is imposed and the actual tax is decided.
What is Proportional Tax?
There is no specific definition, though any tax that is levied at a uniform rate irrespective of the subject of taxation is said to be a proportional tax. In some cases, the same definition is put forth, 'as an income tax that taxes/ takes up/ charges the same percentage or rate of tax on everyone and the entire population, irrespective of how much or less the individual earns'.
Simply put, if the income tax of a nation is to be imposed in a proportional manner, then the entire population pays taxes at the rate of say 10%, irrespective of their level of income. Thus, the basic logic is that it gets imposed at a rate that is uniform and constant irrespective of the subject of taxation, which in this case is income. This taxation system is the oldest of all tax systems. If you look at the history of taxes, you will see that this system was also present in the times of monarchies. The tax was collected at a rate that was applicable for the entire population, irrespective of their income levels. It must be noted that the flat tax system is a bit different from the proportional tax system, as there are some minor deductions that are permitted in the flat tax system, and as a result, the tax rate that is levied and the actual tax that is actually paid, differ. There is a significant similarity in the two, not to mention an acute congruence in certain facets.
The reason that this system has become scarce is because it was quite unjust on the people's income. In such a light, during the years following the industrial revolution and the socialist awakening, progressive tax systems were introduced. The progressive tax system levies higher tax rates on people who have a high income and low rate on people who have lower incomes. The tax systems that do not follow the progressive tax features are connoted to be regressive, even though the actual taxation is not literally regressive. Thus, on the whole, the uniform proportional tax rate makes the tax system simple, yet regressive.
Proportional Tax in Today's World
Even today, several cases of proportional tax are found in highly evolved taxation systems that are mainly progressive in nature. A common connotation is that most of the indirect taxes are proportional taxes. Here are some common taxes which are deemed to be proportional taxes:
- The sales tax of most nations is a proportional tax. The reason that it is said to be a proportional is because it is levied in a uniform percentage, which is unaffected by the sale price of the said commodities.
- The VAT or the Value Added Tax which has become a new development in several economies is another example. There are however, some economies where the tax payers are classified as per the industry and the VAT rate becomes applicable for that very industry.
- The third example is of some specified payroll taxes such as the professional taxes. Here the amount actually deducted from that payroll and the percentage of tax charged, remains constant for all tax payers.
0 komentar:
Posting Komentar