| |
|
| | Home » Other Types of Tax » Flat Tax | |
Flat Tax |
| |
Flat Tax is also known as flat rate tax. Flat Tax as the name suggests is a fixed rate of taxation that is imposed. The motive behind imposing flat tax is that the government wants to curb the practice of tax evasion. A minimum or marginal amount is imposed as a flat tax, so that people are encouraged to pay the tax.
In most advanced countries, the flat tax system is not a very popular one. One example is that of service tax or household income tax, in certain countries.
|
There is a flat percentage that every one has to pay, irrespective of their income. In certain developing countries, the small business owners are required to pay a fixed amount of money as tax, irrespective of their annual income. This is an example of flat tax.
It is expected that a flat tax system, if it is implemented in its real sense would result in the interaction of ,only, business owners and self employed individuals. Under such an ideal flat tax scheme, there would be no partial or preferential treatment, every one would be forced to pay tax and at the same time there would be no scheme of tax advantages or tax rebates.
However, model of imposing flat tax is more popular in the developing countries than the developed countries. In the developing countries there is a far higher rate of tax evasion. The governments make huge losses because large numbers risk facing penalty and do not pay the taxes that they are supposed to. It does not serve any purpose to penalize people as it does not really solve the issue of non payment of taxes.
The payment of taxes is essential. It is with the help of the taxes collected that the government supplements its income. The government finances activities like defense research, medical research, and various public utility services like the transportation system, the educational system and the social security system through the taxes that are collected from various sources.
Some income tax planners claim that a flat tax scheme has its own set of advantages. The flat tax scheme, it is claimed, will stream line the collection process of taxes. It will remove the complications that are usually associated with the normal tax schemes associated with progressive and regressive taxation schemes. The tax laws will be easier to comprehend, and people will have fewer confusions regarding the payment of taxes. Because of a simplified tax system, people will pay taxes, at least they are expected to pay taxes. The incidence of tax evasion will do down, and at the same time the government should be able to increase the percentage of its tax collection process.
Another advantage that may be regarded as a plus point of the flat tax system, is that the simplified structure of the payment system of taxes will cut down on the cost that is involved in the processing of taxes. Imagine a situation where the filing of income tax returns does not need the 'help' of middlemen like accountants. In effect, the government will be able to cut down on the processing costs. It will be a simple and direct process where the individual has no confusions regarding the percentage of tax that he is entitled to pay.
Click on the links of salestaxhub.com to learn more about Flat Tax. The site offers useful information on the different types of sales tax. | | | |
| | | |
| |
