A means by which governments finance their expenditure by imposing charges on citizens and corporate entities.
Governments use taxation to encourage or discourage certain economic decisions. For example, reduction in taxable personal (or household)
income by the amount paid as interest on home mortgage loans results in greater construction activity, and generates
more jobs. See also taxation principles.
What is Tax? definition and meaning
A fee charged ("levied") by a government on a product, income, oractivity. If tax is levied directly on personal or corporate income, then it is a direct tax. If tax is levied on the price of a good or service, then it is called an indirect tax. The purpose of taxation is to financegovernment expenditure. One of the most important uses of taxes is to finance public goods and services, such as street lighting and street cleaning. Since public goods and services do not allow a non-payer to be excluded, or allow exclusion by a consumer, there cannot be a market in the good or service, and so they need to be provided by the government or a quasi-government agency, which tend to finance themselves largely through taxes.
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