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A tax is a specified amount of money that is levied by an authority or a government on services provided or goods sold. There exists different type of taxes that are levied by the government. For example in the United States there exist taxes such as income tax created as early as 1861, property tax, capital gains tax, corporate tax and inheritance tax.
These taxes have very many are very important because they form part of the government revenue and this is why it is a very important discipline of the business subject. Other purposes of taxation are: protection of infant industries and against consumption of harmful products, economic stability, fair distribution of income and promotion of equality in allocation of resources.
The government is granted the power to tax by the legislation enacted by the relevant legislative authority. This is governed by the taxation principles of economy, simplicity, economy, efficiency, neutrality and certainty. These principles dictate the incidence and the burden of tax through the process of tax shifting.
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