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CandleFocus Glossary Editor
Tax Base is an important concept used to determine the amount of taxes leviable on individuals or businesses. It specifies the economic activities, or the objects, or organizations, or persons that are eligible to be taxed. Tax base helps governments set up tax rates and broaden their revenue base.
Tax base defines which activities, goods, or persons are subject to taxation. For example, a tax base may include sales of goods, services, and investments. The exact scope of these taxable activities varies from one jurisdiction to another. Further, some jurisdictions may levy different taxes on different types of activities.
To determine the amount to be taxed, governments usually apply different methods. These can range from flat tax rates to progressive tax rates and from indirect taxes such as Value Added Tax (VAT) to direct taxes such as taxes on income and property. For instance, income taxes are charged on any income earned by individuals or corporations, and the tax rate is determined by their tax bases.
For indirect taxes, governments tend to focus on the production and sale of goods, as well as services consumed by customers. Depending on the country, these taxes can fall on the producer of goods and services, the seller, or the consumer. For instance, Value Added Tax (VAT) is charged on the market value of a good or service and EU member-states levy VAT at the standard rate of at least 15 percent.
Finally, taxes on property can be charged on the basis of the ownership or possession of residential or commercial property. For example, local governments may charge property taxes on buildings owned or leased by individuals or businesses. Similarly, taxes might be imposed on land and structures, such as bridges and roads, based on their area or length.
Tax base is an essential tool for governments in setting tax rates for their citizens and businesses, as well as for ensuring equitable distribution of the burden of taxation. By setting the tax base, governments guarantee the objective, consistent, and fair determination of tax rates.
Tax base defines which activities, goods, or persons are subject to taxation. For example, a tax base may include sales of goods, services, and investments. The exact scope of these taxable activities varies from one jurisdiction to another. Further, some jurisdictions may levy different taxes on different types of activities.
To determine the amount to be taxed, governments usually apply different methods. These can range from flat tax rates to progressive tax rates and from indirect taxes such as Value Added Tax (VAT) to direct taxes such as taxes on income and property. For instance, income taxes are charged on any income earned by individuals or corporations, and the tax rate is determined by their tax bases.
For indirect taxes, governments tend to focus on the production and sale of goods, as well as services consumed by customers. Depending on the country, these taxes can fall on the producer of goods and services, the seller, or the consumer. For instance, Value Added Tax (VAT) is charged on the market value of a good or service and EU member-states levy VAT at the standard rate of at least 15 percent.
Finally, taxes on property can be charged on the basis of the ownership or possession of residential or commercial property. For example, local governments may charge property taxes on buildings owned or leased by individuals or businesses. Similarly, taxes might be imposed on land and structures, such as bridges and roads, based on their area or length.
Tax base is an essential tool for governments in setting tax rates for their citizens and businesses, as well as for ensuring equitable distribution of the burden of taxation. By setting the tax base, governments guarantee the objective, consistent, and fair determination of tax rates.