The procedure for collecting tax system, fees, duties and other obligatory payments from a citizen established in a certain territory is one of the oldest signs of the existence of a state.
In the modern world, such payers are individuals or legal entities who are required by law to pay taxes. The tax system is the main credit and financial mechanism of state regulation of the economy.
By definition, the tax system is a system based on certain principles of social relations regulated by the norms of law, which are formed in connection with the establishment and collection of taxes and fees (taxation).
The tax system of any country is the most important link not only in the financial system of the state, of which it is an integral part, but also in the overall system of economic regulation. Tax systems are used as an effective tool for implementing the financial and economic policy of the state. With the help of taxes, socio-economic processes are regulated, the development of certain sectors of the economy and activities is encouraged or, on the contrary, restrained in the interests of the natural development of the economy, and the overall pace of socio-economic development and the level of employment of the population are also maintained.
The tax system as a whole and each individual tax have a number of functions. The functions of the tax system are derived from the objective functions of taxes; in the tax theory, the main and determining so far is only one function – fiscal. Regarding other functions, there are different opinions: from denying the existence of any other functions, except for fiscal and, at best, control, to an excessive expansion of their number. This is due to the fact that in the modern world the functions of the state have increased many times over: in addition to traditional socio-political functions, the state in one form or another regulates all socio-economic processes.
Without discussing this, we will only note that the following functions of the tax system have received the greatest recognition in this regard: the already noted fiscal, macroeconomic (regulatory), distributive, social, stimulating, control.
The tax system of the state and its elements
Considering that the tax system of the state is considered in general terms as a set of social relations associated with the establishment and collection of taxes, the following main elements of such a system can be distinguished:
- taxes;
- taxpayers;
- tax authorities;
- tax legislation.
Taxes are obligatory payments that individuals and organizations transfer free of charge to the budget. With these funds, the state can perform its main functions: provide social support, finance education, healthcare, law and order, improvement of settlements, construction of roads, and so on.
In the composition of taxpayers, we also include payers of fees and insurance premiums, i.e. organizations and individuals who are obligated to pay taxes, fees or insurance premiums. This element can also include tax agents.
A revenue service, revenue agency or taxation authority is a government agency responsible for the intake of government revenue, including taxes and sometimes non-tax revenue. Depending on the jurisdiction, revenue services may be charged with tax collection, investigation of tax evasion, or carrying out audits.
In certain instances, they also administer payments to certain relevant individuals (such as statutory sick pay, statutory maternity pay) as well as targeted financial support (welfare) to families and individuals (through payment of tax credits or transfer payments).
Sum up about tax system
Tax legislation is the whole complex of legal norms adopted by state bodies of the state, which regulate public relations in the field of accrual and payment of taxes. Normative-legal acts can be adopted by the country’s legislative bodies, executive authorities and local self-government bodies within the powers provided by the Constitution.
The list of the above elements of the tax system cannot be considered exhaustive: it only gives a general idea of the structure of the tax system.
Read more: https://taxtaxation.com/principle-of-building-tax-systems/
FAQ
A tax system is a set of rules and regulations that govern how taxes are collected, calculated, and enforced within a country or region.
Taxes are collected through various means, such as income tax withholding from paychecks, sales tax on goods and services, property tax on real estate, and corporate tax on business profits.
A flat tax system is a system where everyone pays the same percentage of their income in taxes. This type of system is often seen as fair because everyone pays the same rate.
A tax audit is an examination of a taxpayer’s financial records by the government to ensure compliance with tax laws and regulations.
The government uses tax revenue to fund public services and programs, such as healthcare, education, infrastructure, and social welfare programs.
