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The History And Principles Behind Tax
by Contalisa Davodo
http://www.fsctax.com

Tax is a feature of all current developed societies. It is
a concept with a long history, though the older versions
are quite different. Looking at tax, understanding the
ideas and the history behind it might just help when we
post of that tax check next time.

Certain types of tax have existed in society for hundreds
of years. Early taxes were paid to societies rulers in
return for protection. Indeed paying for services and
safety is one of the fundamentals of a tax system. Not all
taxes were paid with money - for example Kings in societies
that existed before the industrial age were paid by labor
or troops.

Most modern tax is taken in the form of money, and the
principles behind taxation have not changed much from those
laid down in the Eighteenth Century by Adam Smith, the
Scottish economist known as the Father of Economics.

When Smith was thinking through the concept of taxation he
felt it needed to follow 4 rules. The first was that the
tax should be fair; the second was that the tax payer
should be able to understand it, therefore it should be
clear; the third rule was that payment should be convenient
and that it should be easy to collect and the forth and
last rule was that the money generated to the government
should be more than was incurred in collection.

Although these ideas have been added to in the last two
centuries, they still form the principles of taxation.
Fairness is the principle that is most interesting, because
it is not obvious what it means. Adam Smith was keep that
taxes were payable, and that no member of society was
punished by the tax system. So how can this be done?

There are three basic options for taxes: everyone could pay
exactly the same; everyone could pay the same percentage of
their income; those with bigger incomes pay a bigger
percentage of their income. The last option is a
progressive tax and has been chosen by all modern states.
The richer are still left with more money after tax, and
this is generally felt to be fairer.

Some people do not find progressive taxation to be fair,
needless to say. What is agreed upon by the administrators
of the progressive tax systems is that setting high end
taxes at too greater percentage can deter work and new
enterprise.

Property, people themselves and companies can all be taxed.
We can also chose different ways of taxing such as customs
or excise duties, a personal income tax, a sales tax and so
on.

Taking out a proportion of earnings, so-.called personal
income tax, can be traced back to Great Britain in 1799. It
was generally considered to be costly to collect and was
slow in being taken up elsewhere - in the United States it
was resisted until 1913!

Transactions can incur tax, called stamp duty - a tax that
has been famously unpopular. Historian cite stamp duty as a
contributing factor to the American fight for independence.
Stamp duty was paid to Britain but plenty of Americans felt
the British were not offering much in return - the
fundamental of taxation. Hence the American War of
Independence was partly fueled by the slogan No Tax Without
Representation.

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