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Taxes are an instrument of public incomes. State use this instrument in order to forcibly take money means of entities under its tax authority. The state use these money means to cover its financial needs and to achieve others, primarily economic and social goals.
Because taxpayers do not get anything directly and immediately in exchange for the spent money, tax resolutions are often subject to discussions about their legitimacy.
The concept of tax
Taxes can be defined as the main instrument of public income with which the modern states settle expenditures from their jurisdiction.
The study of tax resolutions launches a lot of questions:
· Which arguments are justifying the existence of tax?
· How to make taxes a fair institution as much as possible?
· Is the tax only fiscal instrument?
· Whether they can achieve the main goals in economic, social and political plan?
Features of tax resolutions
· The tax is a part of property that citizen gives to a State in order to keep the rest of the property.
· Taxes are fees for the protection that the state provides to its citizens.
· Taxes are the forcibly giving with no rights to compensation.
· Taxes are forced incomes of public legal authority for which the public authority does not give any service to taxpayers.
Features of taxes that differ from other public incomes are:
1. They are intended for settlement of public expenditures;
2. The lack of an immediate service for taxpayers;
3. They are collected in money;
4. They are paid on the territorial approach;
5. Coercion of tax resolutions.
Justification of taxes
Modern states collect certain funds in order to achieve many and varied tasks and functions of public spending, according to the Constitution and laws. Public incomes are funds whose main objective is the financing or coverage of public and social functions.
Participation and the importance of certain types of public incomes in the total volume of public incomes vary from country to country depending on economic and socio-political factors.
The tax is an instrument of public incomes by which the state, including the lower forms of political – territorial organization, forcedly takes funds from the entities under its tax authority, without immediate returning of favor, in order to cover its financial needs and achieve other, mainly economic and social goals.
So, it is necessary for state to have ensured funding in order to achieve its main goals and functions. This fact totally justifies the existence of the tax resolutions.
The origin and development
In the modern world, taxes are the main and most important instrument of public incomes to meet the general and social needs. Between 80-90% of own incomes, state collects through various taxes for funds used for filling of public needs.
Defining the concept of tax considerably varies depending on the period in which it arises.
- In ancient Greece and Rome, the tax was interpreted as giving of the conquered to the winners and the tax liability was equated with the concept of subordination.
- In feudalism, the view on taxes was greatly evolved, and justification of taxation was in completely different moments. During this period, the tax was treated as a gift and as an aid.
- As a form of state income, taxes experienced development only in capitalism, and in this period the highest number of attempts to define taxes was originated.
- According to the new understanding of tax, it can be defined as the most important and most productive instrument of budget incomes, which state legally introduces to all the users who have the tax ability (individuals and legal entities), for the filling of public needs and achieving certain economic and social objectives.
Objectives of taxation
- Tax incomes are the main form of incomes, which means that the notion of taxes involves obtaining of financing resources of the government and other bodies. It is called a fiscal purpose of tax.
- At various times, financial theory has represented different views regarding the objectives of tax.
- During ancient and middle ages, taxes generally had fiscal targets.
- During the period of capitalism, taxes were starting to be used for the realization of economic and political tasks. That is period of developing of so-called no-fiscal purposes of tax.
- In the stage of economic liberalism prevalent was opinion on solely fiscal purpose of taxation, and representatives of economic liberalism appear as protagonists of so-called neutral taxes. These taxes, as the main task had income collection for the state treasury, and that when it does not disturb the existing economic structure. In addition, theorists of the period of economic liberalism insisted on as little as possible tax liability.
- It is a great importance of tax policy in underdeveloped countries, where this policy is proved to be useful in mobilizing of internal accumulation to finance rapid economic development of this part of the world. These countries have also used tax policy to attract foreign capital required for the filling of economic development.
- Also, it is known that social and political goals can be achieved by a certain degree of tax policy. For example, taxation of alcohol consumption- Increasing the tax rate on consumption of alcoholic beverages can lead to significantly reduced alcohol consumption in the country.
Shifting of taxes
That question at first glance seem superfluous, because everyone thinks that when he pay taxes, he will finally bear them. But it will not always be like that. Characteristic of some taxes is that they can be shifted to another person.
Here’s an example: introduction of taxes for fur coats will be paid mostly by wealthy people, because they are the main buyers of such garments. But when taxes for fur coat are increased, they may decide not to buy it, because the coat becomes too expensive. Then the sale of fur coats will fall, and furriers will have to reduce their costs. They will probably reduce the salaries of their workers, as part of costs. Thereby increased tax on fur coats is not ultimately paid by the rich, but it is in the form of lower salaries shifted to the workers.
Making a good tax system is very complicated task. In practice, tax principles are conflicting, and there is no tax system that respects equally all the principles. Some tax resolutions are fairer than others, some are more effective, while others are simple to use, but however, no one can deny their necessity and justification.