1.
Income tax
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An income tax is a tax imposed on individuals or entities that varies with the income or profits of the taxpayer. Many jurisdictions refer to income tax on business entities as companies tax or corporate tax, partnerships generally are not taxed, rather, the partners are taxed on their share of partnership items. Tax may be imposed by both a country and subdivisions, most jurisdictions exempt locally organized charitable organizations from tax. Income tax generally is computed as the product of a tax rate times taxable income, the tax rate may increase as taxable income increases. Taxation rates may vary by type or characteristics of the taxpayer, capital gains may be taxed at different rates than other income. Credits of various sorts may be allowed that reduce tax, some jurisdictions impose the higher of an income tax or a tax on an alternative base or measure of income. Taxable income of resident in the jurisdiction is generally total income less income producing expenses. Generally, only net gain from sale of property, including goods held for sale, is included in income, Income of a corporations shareholders usually includes distributions of profits from the corporation. Deductions typically include all income producing or business expenses including an allowance for recovery of costs of business assets, many jurisdictions allow notional deductions for individuals, and may allow deduction of some personal expenses. Most jurisdictions either do not tax income earned outside the jurisdiction or allow a credit for taxes paid to other jurisdictions on such income, nonresidents are taxed only on certain types of income from sources within the jurisdictions, with few exceptions. Most jurisdictions require self-assessment of the tax and require payers of some types of income to withhold tax from those payments, advance payments of tax by taxpayers may be required. Taxpayers not timely paying tax owed are generally subject to significant penalties, for most of the history of civilization, these preconditions did not exist, and taxes were based on other factors. Taxes on wealth, social position, and ownership of the means of production were all common, the first income tax is generally attributed to Egypt. In the early days of the Roman Republic, public taxes consisted of modest assessments on owned wealth, the tax rate under normal circumstances was 1% and sometimes would climb as high as 3% in situations such as war. These modest taxes were levied against land, homes and other estate, slaves, animals, personal items. The more a person had in property, the tax they paid. In the year 10 AD, Emperor Wang Mang of the Xin Dynasty instituted an unprecedented income tax, at the rate of 10 percent of profits, for professionals and skilled labor. He was overthrown 13 years later in 23 AD and earlier policies were restored during the reestablished Han Dynasty which followed, one of the first recorded taxes on income was the Saladin tithe introduced by Henry II in 1188 to raise money for the Third Crusade
2.
Tax
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A tax is a financial charge or other levy imposed upon a taxpayer by a state or the functional equivalent of a state to fund various public expenditures. A failure to pay, or evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent, the legal definition and the economic definition of taxes differ in that economists do not regard many transfers to governments as taxes. For example, some transfers to the sector are comparable to prices. Examples include tuition at public universities and fees for utilities provided by local governments, governments also obtain resources by creating money and coins, through voluntary gifts, by imposing penalties, by borrowing, and by confiscating wealth. In modern taxation systems, governments levy taxes in money, but in-kind and corvée taxation are characteristic of traditional or pre-capitalist states, the method of taxation and the government expenditure of taxes raised is often highly debated in politics and economics. Tax collection is performed by a government agency such as the Canada Revenue Agency, when taxes are not fully paid, the state may impose civil penalties or criminal penalties on the non-paying entity or individual. The levying of taxes aims to raise revenue to fund governing and/or to alter prices in order to affect demand, States and their functional equivalents throughout history have used money provided by taxation to carry out many functions. A governments ability to raise taxes is called its fiscal capacity, when expenditures exceed tax revenue, a government accumulates debt. A portion of taxes may be used to service past debts, governments also use taxes to fund welfare and public services. These services can include education systems, pensions for the elderly, unemployment benefits, energy, water and waste management systems are also common public utilities. A tax effectively changes relative prices of products and they have therefore sought to identify the kind of tax system that would minimize this distortion. Governments use different kinds of taxes and vary the tax rates, historically, taxes on the poor supported the nobility, modern social-security systems aim to support the poor, the disabled, or the retired by taxes on those who are still working. A states tax system often reflects its communal values and the values of those in current political power. To create a system of taxation, a state must make choices regarding the distribution of the tax burden—who will pay taxes and how much they will pay—and how the taxes collected will be spent. In democratic nations where the public elects those in charge of establishing or administering the tax system, in countries where the public does not have a significant amount of influence over the system of taxation, that system may reflect more closely the values of those in power. All large businesses incur administrative costs in the process of delivering revenue collected from customers to the suppliers of the goods or services being purchased. Taxation is no different, the resource collected from the public through taxation is always greater than the amount which can be used by the government, the difference is called the compliance cost and includes the labour cost and other expenses incurred in complying with tax laws and rules
3.
Progressive tax
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A progressive tax is a tax in which the tax rate increases as the taxable amount increases. The term progressive refers to the way the tax rate progresses from low to high, the term can be applied to individual taxes or to a tax system as a whole, a year, multi-year, or lifetime. Progressive taxes are imposed in an attempt to reduce the tax incidence of people with an ability to pay. The opposite of a tax is a regressive tax, where the relative tax rate or burden decreases as an individuals ability to pay increases. The term is applied in reference to personal income taxes. It can also apply to adjustments of the tax base by using tax exemptions, tax credits, Progressive taxation has also been positively associated with happiness, the subjective well-being of nations and citizen satisfaction with public goods, such as education and transportation. In the early days of the Roman Republic, public taxes consisted of assessments on owned wealth, the tax rate under normal circumstances was 1% of property value, and could sometimes climb as high as 3% in situations such as war. These taxes were levied against land, homes and other estate, slaves, animals, personal items. By 167 BC, Rome no longer needed to levy a tax against its citizens in the Italian peninsula, due to the riches acquired from conquered provinces. The first modern income tax was introduced in Britain by Prime Minister William Pitt the Younger in his budget of December 1798, to pay for weapons and equipment for the French Revolutionary War. Pitts new graduated income tax began at a levy of 2 old pence in the pound on incomes over £60, Pitt hoped that the new income tax would raise £10 million, but actual receipts for 1799 totalled just over £6 million. Pitts income tax was levied from 1799 to 1802, when it was abolished by Henry Addington during the Peace of Amiens, Addington had taken over as prime minister in 1801, after Pitts resignation over Catholic Emancipation. The income tax was reintroduced by Addington in 1803 when hostilities recommenced, the United Kingdom income tax was reintroduced by Sir Robert Peel in the Income Tax Act 1842. Peel, as a Conservative, had opposed income tax in the 1841 general election, the new income tax, based on Addingtons model, was imposed on incomes above £150. Although this measure was intended to be temporary, it soon became a fixture of the British taxation system. A committee was formed in 1851 under Joseph Hume to investigate the matter, despite the vociferous objection, William Gladstone, Chancellor of the Exchequer from 1852, kept the progressive income tax, and extended it to cover the costs of the Crimean War. By the 1860s, the tax had become a grudgingly accepted element of the English fiscal system. In the United States, the first progressive income tax was established by the Revenue Act of 1862 and this was signed into law by President Abraham Lincoln and repealed the flat tax, which had been brought in under the Revenue Act of 1861
4.
Cost of goods sold
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Cost of goods sold refers to the carrying value of goods sold during a particular period. Costs are associated with particular goods using one of several formulas, including identification, first-in first-out. Costs include all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition, costs of goods made by the business include material, labor, and allocated overhead. The costs of goods not yet sold are deferred as costs of inventory until the inventory is sold or written down in value. Many businesses sell goods that they have bought or produced, when the goods are bought or produced, the costs associated with such goods are capitalized as part of inventory of goods. These costs are treated as an expense in the period the business income from sale of the goods. Determining costs requires keeping records of goods or materials purchased and any discounts on such purchase, in addition, if the goods are modified, the business must determine the costs incurred in modifying the goods. Such modification costs include labor, supplies or additional material, supervision, quality control, Principles for determining costs may be easily stated, but application in practice is often difficult due to a variety of considerations in the allocation of costs. Cost of goods sold may also reflect adjustments, among the potential adjustments are decline in value of the goods, obsolescence, damage, etc. When multiple goods are bought or made, it may be necessary to identify which costs relate to particular goods sold. This may be using an identification convention, such as specific identification of the goods, first-in-first-out. Alternative systems may be used in countries, such as last-in-first-out, gross profit method, retail method. Cost of goods sold may be the same or different for accounting and tax purposes, certain expenses are included in COGS. Expenses that are included in COGS cannot be deducted again as a business expense, depreciation Inventories have a significant effect on profits. A business that makes or buys goods to sell must keep track of inventories of goods under all accounting, Fred buys auto parts and resells them. In 2008, Fred buys $100 worth of parts and he sells parts for $80 that he bought for $30, and has $70 worth of parts left. In 2009, he sells the remainder of the parts for $180, if he keeps track of inventory, his profit in 2008 is $50, and his profit in 2009 is $110, or $160 in total. If he deducted all the costs in 2008, he would have a loss of $20 in 2008, the total is the same, but the timing is much different
