Taxes Mateusz Szczurek

What is a tax? A levy imposed on an individual or legal entity by a state or local government to fund various public expenditures. Payment of tax normally does not generate direct reciprocal commitment. There should be no reference to specific benefit received (as opposed to a user fee or toll). In practice the definition is somewhat blurry: court, driving licence, passport, RTV fees are considered as non-tax revenues by OECD Payments allowing selling alcohol or tobacco, hunting, fishing, gambling, permission to own a dog or a car are taxes. Social security contribution are a border-line case - often included in the total tax burden (OECD) Early taxes, eg. ancient Egyptian corvée (forced labour), or tithe were not monetary.

What are taxes for? State's functions have to be financed. Taxes provide majority of revenues for the state. Other sources of income: state owned companies' profits (typically natural resources) Sale of state assets (short-term solution) Debt, usually residual

Are taxes only for collecting money for the state? Functions of taxes Fiscal: providing financing for the state Redistributive Stimulating and discouraging via repricing Correcting externalities and other market failures Informative: about the state of the economy VAT revenues as a proxy for GDP growth

Good taxes (Adam Smith’s Wealth of the Nations) Vertical equity The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. Horizontal equity Certainty and similar treatment of similar cases Efficiency of tax collection / ease of payment Right level of taxation

OECD classification of taxes Taxes on income, profits and capital gains Individuals', Corporate Social security contributions Employees, Employers, Self-employed or non-employed Taxes on payroll and workforce Taxes on property Recurrent taxes on immovable property (real estate) Recurrent taxes on net wealth Individual or corporate Estate, inheritance and gift taxes Taxes on financial and capital transactions Other non-recurrent taxes on property (eg. one-off tax on net wealth) Taxes on goods and services Taxes on production, sale, transfer, leasing and delivery of goods and rendering of services General VAT Sales taxes On specific goods and services Excise Customs and import duties On exports On investment goods Profits of fiscal monopolies On use of goods or on permission to use goods or perform activities Other taxes

Oecd

Tax on property (% of GDP), source: OECD UK FR BE

Taxes on goods and services (% of GDP) HU DK GR, SLV

Literature Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations., Book V, Chapter II Edwin Cannan, ed. 1904 . <http://www.econlib.org/library/Smith/smWN12.html>. OECD, 2015, The OECD classification and interpretative guide, http://www.oecd.org/tax/tax-policy/oecd-classification-taxes- interpretative-guide.pdf