Modern trends related to taxation

Although there are significant national variations, the following broad assertions can be used to characterise the growth of taxes in recent years:-

Parliaments now frequently possess the authority to impose taxes since the sovereign's former power to do so in a more or less arbitrary manner has been lost. The average tax rate and the share of taxes collected in the national income have both dramatically grown. Taxes are now paid in cash rather than goods.

The practise of "tax farming," or collecting taxes from third parties, has been outlawed; henceforth, government workers are responsible for tax assessment and collection. On the other hand, several less-developed nations have lately engaged banks to collect taxes as a way to get around the inefficiencies of government institutions. Some nations are also outsourcing the collection of customs charges.

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Additionally, the use of excises and customs charges have decreased. The use of sales taxes and other types of general consumption taxes is becoming more common in many nations. The switch from turnover taxes to value-added taxes was a significant development in the late 20th century.

Despite continuing to be significant sources of income for local governments, taxes on the right to conduct business and on real estate have lost momentum. Most industrialised nations have seen an increase in the absolute and relative importance of direct personal taxation, and VAT and payroll taxes have drawn more attention.

At the beginning of the 20th century, the rise of e-commerce created substantial challenges for the collection of sales taxes, income taxes, and VAT. The challenges in tax administration were exacerbated by the anonymity of buyers and sellers, the opportunity to do business from offshore tax havens, the incapacity of tax authorities to track the movement of digital commodities or intellectual property, and the epidemic of untraceable money transactions.

The largest sources of revenue in modern tax systems are income taxes (on both individuals and enterprises), payroll taxes, general sales taxes, and (in certain countries) property taxes. The revenue is no longer a "rich man's" tax; instead, it is now a tax that the majority of people pay, and in certain nations, it is now paired with a tax on net worth.

The emphasis on wealth redistribution and the ability-to-pay principle, which led to graduated rates and a high top marginal income tax, has reached its zenith and has been replaced by a greater understanding of the economic inefficiencies and disincentives caused by high tax rates.

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