Question

Compare and contrast the three basic types of taxation that governments levy within their tax jurisdictions.

Answer 1

The three basic types of taxation that governments levy within their jurisdictions are:-

1) Direct taxes are levied by governments to collect income taxes from the people and corporations based on their gross income. This usually follows a graded structure wherein people or corporations with higher income are to pay more taxes on their income.

2) Indirect taxes are levied by governments on sale and purchase of items for regular consumptions. This is usually based on the priority of the item in the consumption bucket. If the item is a luxury item, then usually the tax rates are higher and if it is a daily consumable, then the tax rates are usually lower

3) Another form of taxation is where the government applies special levies or duties on the purchase of properties or assets. These levies are put in place by the local government as well as the federal government. Usually these levies are decreased or increased depending on whether government is trying to prop up economic activity or subdue inflationary tendencies