Tax

Also called: levy or tax

Taxes are mandatory charges by the government to residents and institutions. Taxes are levied by a government on income, expenses and property.

The primary purpose of taxation is to generate revenue for the government, which can be used to maintain public services. Tax can also be levied as a tool, for example excise tax on tobacco to discourage smoking.

Different forms of taxation

Some examples of taxes:

• Income tax: tax on residents' income
• Payroll tax: income tax withholding to employers
• Corporate income tax: tax on corporate profits
• Sales tax or VAT: Tax on consumption and value added
• Excise tax: Tax levied on the sale of specific goods, such as tobacco and fuel
• Wealth tax: tax on the capital one owns
• Dividend tax: tax on profits from shares and securities
• Property tax (OZB): Municipal levy on property ownership.
• Road tax: tax on ownership of vehicles
• Sewer charge: tax levied by water boards for the use of the sewer system
• Gaming tax: tax on distributions from lotteries and other games of chance
• Dog tax: Municipal charge to dog owners
• Fees: Direct payment for government services, such as issuance of a passport
• Environmental tax: various charges for taxing the environment
• Bank tax: levy on the unsecured debts of banks
• Insurance tax: Government levy on insurance premiums.
• Court Fees: Fees for use of the court system.
• Inheritance tax: Tax levied on inheritances
• Import tax: tax levied on the import of goods from abroad

Direct and indirect remittance of tax

The Tax Administration, part of the Ministry of Finance, is responsible for collecting taxes. Some taxes are levied directly from the taxpayer, such as income tax and property tax. Other taxes are levied indirectly. An example is sales tax, which is paid by consumers but is incorporated into the selling price of products and services.

Tax fraud and tax debt

Direct taxes are usually based on a tax return, followed by a tax assessment. Failure to declare tax or providing incorrect information in the return is tax evasion or tax fraud.

When tax is not paid on time, a tax debt is accumulated. As a result, the taxpayer may be required to pay interest and/or penalties in addition to the tax, which may depend on the amount of the debt or the duration of the payment default.

Determining the tax sum

There are several principles for determining the amount of a tax:

• Constant: A fixed tax rate applies.
  Example: fees for municipal services such as a passport or marriage.
• Proportional: There is a fixed percentage over the tax base.
  This is the case with gaming tax, for example.
• Progressive: There is an increasing percentage as the base increases.
  Like the various income tax brackets in Box 1.
• Degressive: A decreasing rate is applied as the base increases.