Tax

Taxes pay for roads, schools, healthcare, defence, the legal system, pensions and much more. Unlike prices paid for goods, taxes are compulsory and are not directly linked to a specific service the taxpayer receives.

Taxes come in many forms. Income taxes are charged on earnings. Payroll or social security taxes fund pensions and benefits. Consumption taxes, such as sales tax and value-added tax, are added to the price of goods and services. Property taxes are charged on land and buildings. Corporate taxes are charged on company profits. Capital gains taxes apply to profits from selling assets.

Taxes can be direct, paid straight to the government by the person who owes them, such as income tax, or indirect, collected by businesses on the government's behalf, such as sales tax.

Taxes also shape behaviour. High taxes on tobacco discourage smoking, while tax relief on pension contributions encourages saving. Because tax rules vary greatly between countries and change frequently, understanding local rules is important for both personal and business decisions.