Latest World News - Breaking News & Top Stories. Latest breaking news and information on the top stories, weather, business, entertainment, politics and many more.
Bitcoin
Ethereum
Ripple
Litecoin
EOS
Cardano
Stellar
NEO
NEM
DigitalCash
Tether
Binance Coin
QTUM
Verge
Ontology
ZCash
Steem

History of Income Tax, System Around The World and who should pay it?

The government gets its money through taxes. There are several ways in which the government uses this money: infrastructure development; healthcare; education; subsidies for farmers; and other government social programs. Direct taxes and indirect taxes are the two basic forms of taxes. Direct taxes are taxes that are charged directly on the amount of money a person earns, such as income tax. Income tax is a tax that is levied directly on an individual’s income. This year’s tax rate is based on the applicable income slab rates.

Who should pay Income Tax? – Types of Income Tax Payers

Different tax rates are applied to different sorts of taxpayers under the Income Tax Act classification system.

Taxpayers are categorized as below:

  • Individuals
  • Hindu Undivided Family (HUF)
  • Association of Persons(AOP)
  • Body of Individuals (BOI)
  • Firms
  • Companies

History of Income Tax, System Around The World and who should we pay it?

Types of Income / Heads of Income

Everyone in India who earns or receives a salary or other kind of compensation is liable to income tax. (This is true whether you are a resident or a non-resident of India.) The Income Tax Department categorises income into five broad categories in order to make categorization easier:

Head of Income Nature of Income covered
Income from Other Sources Income from savings bank account interest, fixed deposits, winning in lotteries is taxable under this head.
Income from House Property Income earned from renting a house property is taxable under this head of income.
Income from Capital Gains Surplus Income from sale of a capital asset such as mutual funds, shares, house property etc is taxable under this head of Income.
Income from Business and Profession Profits earned by self employed individuals, businesses , freelancers or contractors & income earned by professionals like life insurance agents, chartered accountants, doctors and lawyers who have their own practice, tuition teachers are taxable under this head.
Income from Salary Income earned from salary and pension is taxable under this head of income

History of Income Tax, System Around The World and who should we pay it?

History

The idea of taxing income is a new one, but it needs a money economy, accurate accounts, a common understanding of receipts, expenses, and profits, and an orderly society with reliable records.

As long as people lived, these conditions didn’t exist. Taxes were based on other things, and people were charged based on that. Income, social status, and ownership of the means of production (like land and slaves) were all taxed. From the very beginning, people did things like tithe and give their first fruits away. These practices are a precursor to the income tax, but they were not very precise and didn’t think about how much money they made.

Read More:- What Is Starlink (STARL)? How Does the STARL Coin / Token Work?

Early ERA

The first income tax is usually thought to have come from Egypt. [1] Public taxes in the early days of the Roman Republic were very small. They were based on how much money and property people had. When things were normal, the tax rate was 1%, but it could go up to 3% when there was a war or something like that.

These taxes were levied on land, homes, other real estate, slaves, animals, personal items, and money. These taxes were very small. In general, the more money a person had in property, the more tax they had to pay. Taxes were taken from people.

In the year 10 AD, Emperor Wang Mang of the Xin Dynasty imposed a tax on professionals and skilled laborer’s that was never done before. It was a 10% tax on their profits. In 23 AD, 13 years after he was overthrown, the Han Dynasty was re-established and old policies were brought back.

What Is Income Tax? What are Common Principles and its Criticisms and history?

Henry II put in place the Saladin tithe in 1188 to raise money for the Third Crusade. This was one of the first taxes on income that people were forced to pay. The tithe said that everyone in England and Wales had to pay taxes on one tenth of their personal income and things that could be moved.

In 1641, Portugal put a tax on personal income called the décima, and it was called that for a long time.

The Modern Era Is Where We Are Now:-

United Kingdom

The present income tax was proposed in 1799 by Henry Beeke, the future Dean of Bristol. Prime Minister William Pitt the Younger instituted this income tax in December 1798 to fund the French Revolutionary War. Pitt’s new graduated (progressive) income tax began at 2 old pence in the pound (1120) on incomes over £60 (equivalent to £5,500 in 2019) and increased to 2 shillings in the pound (10 percent) on incomes over £200 (equivalent to £1,500 in 2019). Pitt expected the new income tax to earn £10 million a year, but in 1799 it only raised £6 million.

Read More:- Apply for a Personal Loan with National Finance Company Today!

During the Peace of Amiens, Henry Addington removed Pitt’s income tax in 1802. After Pitt resigned over Catholic Emancipation, Addington became Prime Minister in 1801. Addington reinstated the income tax in 1803 when conflicts with France resumed. But it was repealed in 1816, a year after Waterloo. Opponents of the tax wanted it repealed and all records deleted. The Chancellor of the Exchequer publicly burnt records, although duplicates were kept in the tax court’s basement.

The Labour Party’s planned 1907 income tax was unpopular with Punch readers in this 1907 cartoon.
Sir Robert Peel reinstated income tax in the UK and Ireland in 1842. Peel, a Conservative, had opposed income tax in 1841, but the budget deficit grew. Incomes over £150 (equal to £16,224 in 2019) were subject to the new Addington-inspired tax. Initially meant to be transitory, this measure became a permanent part of British taxes.

In 1851, a committee headed by Joseph Hume investigated the issue but came up empty-handed. With the Chancellor of the Exchequer from 1852, William Gladstone, the progressive income tax was preserved and increased to meet the Crimean War’s expenditures. Progressive taxes were finally adopted as part of the UK fiscal system in the 1860s.

History of Income Tax, System Around The World and who should we pay it?

United States ( USA )

On August 5, 1861, the US government enacted the first personal income tax (3 percent of all incomes above $800) (equivalent to $18,600 in 2020). In 1862, it was replaced by a new income tax. The Wilson-Gorman tariff imposed the first peacetime income tax in 1894. The rate was 2% on income exceeding $4000 (equivalent to $110,000 in 2020), therefore less than 10% of families paid it.

The income tax was designed to replace money lost due to tariff reductions. The US Supreme Court deemed the income tax illegal, citing the 10th Amendment’s prohibition of any powers not expressly granted in the US Constitution.

The Sixteenth Amendment to the US Constitution made the income tax permanent in 1913. In 1918, yearly internal revenue collections surpassed $1 billion, peaking to $5.4 billion in 1920. The amount of income tax collected has changed greatly, from 1% in the early days of US income tax to over 90% during WWII.

Read More:- What Is Income Tax? What are its Common Principles and Criticisms?

Around the World

Almost every country on the planet has taxes on income, and they are used in most of them. The tax systems are very different. They can be progressive, proportional, or regressive, depending on what kind of tax they are. In order to compare tax rates around the world, it can be hard and a little subjective.

 

Most tax laws in most countries are very complicated. And the tax burden is different for different groups in each country and sub-unit of the country. Of course, the services that governments give in exchange for taxes also vary. Which makes it even more difficult to compare them.

Read More:- Is a Home Depot Project Loan Worth the Money? (How They Work and Other Details)

There are two ways that countries that tax income do so: territorial or residential. If you live in a country, you pay taxes on income that comes from inside the country. In the residential system, people who live in the country are taxed on both their local and foreign income. People who live outside the country are only taxed on their local income. Also, a very small number of countries, like the United States, also tax their nonresident citizens on their entire income.

A resident system of taxation is when a country lets its citizens take deductions or credits for the taxes they already pay to other countries on their money that comes from outside of the country. Many countries also sign tax treaties with each other to avoid or cut down on double taxation.

Countries don’t always use the same tax system for people and businesses. For example, France has a system for individuals and a system for businesses. Singapore has the opposite system, and Brunei taxes corporate income but not personal income.

Comments are closed.