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Taxes on income from earnings are the most obvious and immediate taxes which most individuals pay. In most countries, the tax is progressive. The larger one's earnings, the higher the rate of tax levied. A government usually fixes allowances, which can be set against income before tax is payable. Tax is then levied at higher rates as income rises up to a final top rate. There may be many bands, rising increasingly from just a few; per cent to rates up to 70% or 80% for the highest earners in some countries. For one year in the U.K. in the 1970s an additional tax levy taxed the highest earners at more than 100%. This meant that the tax-payer, as well as losing the whole of his or her income after a particular point, also paid, in effect, a levy on wealth. The tax at which the highest rate is paid by the individual is known as the 'marginal rate'. This is important when paying tax on income which may be received gross (without the expences being deducted).
In recent years governments have tried to simplify income taxes and take the lowest earners out of the tax equation altogether. There has also been a trend away from direct taxes on income to indirect taxes, which are generally, though not entirely, optional. All indirect taxes on a particular good or service are levied at one rate, and are never progressive. Some items, which are regarded as necessities, are free of indirect taxes in some countries.
Taxable income is not calculated in the same way in every country. A wide range of income may or may not be subject to tax. There is a basic qualitative difference in what income is liable to tax. Some countries have a global approach to taxation. This means that an individual resident in a particular country & pays tax in that country on his or her income, wherever in the world it arises. For instance, an actor, writer or even a businessman may have income in any one tax year from a number of countries. Where he is resident in a country with global taxation he must declare all his income to the tax authorities, who will then tax him on the total. The USA, the UK and most advanced industrialized countries have global systems of taxation. Other countries (Singapore and Malaysia are examples) have a territorial system of tax. This means that income is only taxed in the country when it is transferred there. For instance, if an individual has savings offshore, or dividends from investments, and leaves that income offshore, it is not liable for tax.
Income tax may simply be paid to the central government.
A pay-as~you-earn system (PAYE), first originated in the UK, is being used by an increasing number of countries. Its chief advantage is efficiency-, as tax is deducted before salary or wages are paid, avoiding payment is difficult. Furthermore, employers effectively become unpaid tax collectors.
PAYE can operate only when the tax payer is employed by someone else. The self-employed must pay directly. Some governments collect a basic amount through PAYE, with a much larger proportion paid annually after the end of the tax year when the individual's tax form submitted. Many governments offer some form of PAYE to the self-employed, or at least impose it on lower-paid workers who might have difficulty in finding a lump sum once a year.
Income tax is not always levied simply at a national level. The USA has state and federal income taxes. Local income taxes are favored in some countries. Local and national services have to be funded. The money may be paid for these by central government from the total tax it raises, or by a local tax on property values, or sales, or through a fiat-rate head tax, as in the community charge. Income tax has the advantage over this: it is most directly related to ability to pay, but it is not popular with the public. It is difficult, it must be admitted, to devise any tax which is popular, but a flat-rate head tax, levied on earners and non-earners alike, is perhaps the least popular. A flat-rate head tax, in contrast to progressive income tax, is regressive, most affecting those least able to pay.
(from "Guide to International Finance" by Alen M.)
I. Answer the following questions:
1. What did you learn about income tax in the first lines of the text?
2. What usually happens before tax is payable?
3. How is tax levied as income rises up?
4. What is a marginal rate and why is it important?
5. How have governments tried to simplify income taxes?
6. What is a modern trend in taxation?
7. What is the basic qualitative difference in what income is liable to tax?
8. What is a global approach to taxation?
9. What is a territorial system of tax?
10. What are the advantages of PAYE?
11. When can’t the PAYE system operate?
12. What advantage has income tax over local tax on property, sales or a flat-rate head tax?
II. Find in the text and translate into Russian:
Avoiding payment; to tax on the total; additional tax; a final top rate; a levy on wealth; a global approach to taxation; tax on property values; to devise any tax; flat-rate tax; marginal rate of tax; a wide range of income; to simplify income taxes; a basic qualitative difference; to deduct tax before salary is paid.
III. Find in the text and write down English equivalents for the following Russian phrases:
Налог на доходы от заработка; устанавливать ряд льгот; выделять необлагаемую налогом сумму дохода; налог собирается по восходящей шкале; получать подоходные налоги без вычета; облагаться налогом по одной ставке; товары первой необходимости; быть свободным от косвенных налогов; налогооблагаемый доход; подлежать налогообложению; налоговые органы; декларировать доходы; иметь сбережения в оффшорной зоне; взимать налог; подавать налоговую форму; налог с продаж.
IV. Find synonyms from (b) below:
a) liable to, main, regard, appear, devise impose, entire, financial year, salary skill, deduct, every year:
b) total, consider, basic, develop, subject to, originate, levy, efficiency, annually, take away, tax year, wages.
V. Find antonyms to the words in the text:
tax-free; progressive; flat rate, decreasing; global approach; the lowest earners; to make complex; direct; obligatory; luxury; unpopular.
VI. Choose correct prepositions and make up sentences:
1) to pay tax on / from income;
2) to levy taxes at / with one rate;
3) to make allowances on / for a taxation;
4) to tax smb after / on the total;
5) to be liable at / to tax;
6) to be available to / for people.
VII. Fill each gap with a suitable word from the box:
1. The income becomes liable to tax in that … financial year.
2. An individual may have … offshore, or dividends from … .
3. Some workers may have difficulty in finding a … once a year.
4. … is only taxed in the country when it is transferred there.
5. PAYE has been adopted by an … number of countries.
6. Employers effectively become unpaid … .
7. A … is levied on earners and non-earners alike.
8. Taxes on income are the … taxes.
9. Tax-payers often have some … fixed by the state.
10. This tax in contrast to progressive income tax, is … .
11. An … tax is levied after the end of the financial year.
12. The highest rate paid by an individual is called a … rate.