For many individuals, taxation is a source of anxiety and stress. However, it is crucial to know every detail about them since they immediately impact your finances, not only understanding how to pay taxes but also why it is important to pay taxes and which ones belong to you.

Learn more about taxes and what they’re used for in the following sections.

Why do we have taxes, and how do we pay for them?

When you pay a tax, you’re funding the government’s spending priorities. These payments are obligatory and may differ based on your legal or natural person status.

A portion of your income is deducted from your taxable income and used to fund public goods and services, including public administration, infrastructure, and social programmes.

Paying taxes, whether they be a percentage of your income, your assets, or the purchase of everyday goods, is critical to the government’s ability to raise money.

It is evident what taxes are and why they are vital to pay, but it is crucial to recognise that not all taxes are the same, and they are used for various reasons. Taxes of various kinds include:

State. This name has several different meanings depending on where you are in your life. Therefore, it is essential that you study the tax laws in your state.

Federal government. They are required by law for every business or commercial activity that takes place in the nation. Value Added Tax, IEPS, and ISR (Income Tax) are only a few examples of the taxes that may be found in them.

Municipal. Taxes on public lighting and predial stand out.

In order to avoid any surprises when it comes time to pay our taxes, it’s critical to understand which types of taxes we owe and what percentage we owe on each.

Consider hiring a tax expert if you don’t know how to pay your taxes yourself, but don’t forget to keep track of your payments and deadlines. Banks like BBVA allow you to make tax payments using a credit card and still get the same benefits.

Taxes – What are they for?

There are a variety of taxes to choose from. Each and every one of them is required in order for the taxable event to occur.

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As a form of government funding, taxes are a form of levying a financial burden on citizens. Individuals and businesses alike must make these reimbursable expenses a priority

In order for the state (as we know it now) to operate, it must rely on taxes to raise money and procure resources.

There are several ways to categorise taxes. 

Taxes that are levied directly. People, both natural and legal, are taxed on their earnings. Knowing who the passive subject is can help you tax wealth more effectively.

Indirect taxation: Taxes the person’s consumption of income. There is no tax payer in this situation, hence it is not up to them to declare their earnings to the appropriate government agency or department.

In a progressive tax system, as income rises, the tax rate (the proportion of the tax base that is applied) rises in tandem.

When taxes are applied to many people rather than a smaller number of people, they are regressive:

The following is a tax illustration:

Value Added Taxes: Indirect and regressive.

Income Tax: Personal, direct, and progressive.

Donations and estates are subject to both direct and indirect taxation.

Direct, actual, and periodical taxes on economic activity

Taxes on real property: direct and immediate.

Indirect tax on property transfers and recorded legal activities:.

Up-to-date on all taxes, including VAT, personal income tax, and corporate taxation

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Phillip Armstrong

The author Phillip Armstrong