What is tax

What is tax

Taxation is a financial contribution that individuals and private businesses make to the government, serving as a crucial means to fund essential public services such as education, healthcare, hospital operations, and transportation.

Why do we pay tax?

The payment of taxes is fundamental to sustaining societal functions. Through taxation, citizens gain access to free primary education and healthcare services, ensuring that these vital benefits are universally available. In essence, the taxes we pay directly contribute to the well-being of society as a whole.

Moreover, taxation plays a pivotal role in mitigating economic disparities among citizens. A progressive tax system ensures that those with higher incomes contribute proportionately more to public finances than those with lower incomes. This mechanism fosters a fair distribution of the financial burden and promotes a more equitable society.

Direct tax and indirect tax

We often distinguish between direct tax and indirect tax.

In Australia, direct taxes are imposed on individuals and corporations, while indirect taxes are levied on goods and services. Examples of direct taxes in Australia include income tax and corporate tax.

On the other hand, indirect taxes in Australia include the Goods and Services Tax (GST), which is a tax on the final consumption of goods and services, and other taxes such as the passenger movement charge, fuel excises, customs duty, alcohol excises, and the wine equalization tax.