Definition of income report
Income has different types of definitions depending on what is addressed. Income tax is seen as the primary source of revenue to the government. The forms of income1 will be explained deeper in the essay. Therefore, income tax refers to the mandatory payment imposed on businesses and individuals by the state. Income tax statute relates to the laws governing the taxation process. This theory aims to ensure there is vertical equity in the taxation process. Wage theory defines the level of individual income, disposable income and amount subjected to tax. The theory falls under the familiar concept of income which classifies income under services; payment on services offered by an individual or under import which occurs periodically. The benefit theory explains how the state should levy taxes in a way that benefits all the individuals who pay taxes.
The theory is applicable in many countries. A case formulated by Hannan says that for each to be effective on the taxation processes, there must be rules governing the process and the state must adhere to standards and regulation. For example, there are various laws governing income tax in New Zealand. The Inland Revenue Authority (IRD) collects the national taxes on behalf of the New Zealand Government. In 1980s new tax reforms were made in New Zealand that led to the reduction of income tax, marginal rate from 66% to 33%. Income tax is characterized by various principles that the government must consider before imposing it. Furthermore, various reasons lead to individuals not to comply with the tax laws6. High tax increases the cost living of individuals and organization.
Therefore, a charge is seen as a burden by most organizations as well individual thus leading them not to comply with the tax laws. The individuals may lack knowledge about the tax law, tax evasion where individuals fails to pay tax. Also, sometimes the taxation systems may be weak leading to individuals’ intentionally failing to comply with the tax laws. The government uses tax funds in various ways; to finance various projects like infrastructure which helps in opening the interior areas making them accessible. The project will help the local investors to access the local resources more easily creating more income to the state. Also, the tax is used to redistribute and allocation of resources equally to all individuals regardless of their ability to pay tax.
The tax funds are used in the process of stabilizing the economy. This is in terms of controlling inflation by maintaining the value of money. Also, income is used to shape the level of hospital amenities by ensuring all the assets and medicines are available in the country. The optimal theory of revenue is used to show how it aids in shaping a country basing on various criteria and organization as it explains the size of a nation. There many circumstances that show how income is used. The standard of living in a country is raised thus improving the lifestyle of individuals, treatments methods are refined and education is of high standards. This means that people will be willing to pay taxes as the funds collected are well spent by the state.
Therefore, the tax rates depend on the gain, type of investment and the duration the investment is held. The investment income is also referred to as the ordinary income as it includes the interest income from investment as well as wages as compensation to the services rendered by workers. The government uses details relating to the capital to determine the tax rate to be levied to a given organization. There numerous difference between income and capital. The differences are useful when the two aspects are put together as it helps to avoid double taxation to individuals as well as business. Bibliography Cassidy, J. and Cheng, A. , 2017, January. Legislative Responses to GST Tax Avoidance in Australia and New Zealand: Lessons for China?.
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