Have you ever wondered where the government gets it fund for the allocations of its infrastructure developments and social projects?
The economic growth of every country can be affected or directly stimulated by government policy like business taxation. Taxation is one of the primary sources of public finance.
The objectives of government taxation
Business taxation plays an important and fundamental role in the lives of a country’s citizens. Taxes that are paid by businesses aid with the financing of public expenditures to several government functions such as public works and social development programs. Moreover, it also has significant impact to the economy. It helps to provide more job opportunities to its citizen.
All business taxpayers should know that their taxes increase the economic growth and job creation in the private sector. At the same time, they should also realize that they also benefit from government programs in return for their tax cost.
Types of business taxation
Basically, the type taxes you must pay and how you pay them depend primarily on the kind of business or businesses you run. The following are the general types of business taxations:
1. Income tax – an annual income tax return should be filed by any business except for partnerships because partnership businesses submit an information return. If your business is using the withholding method of tax settlements, you may pay your taxes as you earn your income.
2. Self-employment tax – this is considered as the “most-liked” form of tax for taxpayers because of the wide coverage it provides them. Self employment or SE tax is a social care and Medicare basically for someone who works for himself. These benefits include disability insurance, hospital insurance, retirement and death insurance.
3. Employment taxes – it is the responsibility of a businessman who has employees on his or her disposals to face his or her employment taxes responsibilities. Employment tax covers Medicare and social security taxes, federal unemployment tax or FUTA federal income tax withholding for his or her employees. However, when it comes to the social security and Medicare taxes, the employer only pays half of the exact tax payment while the rest is paid by the employees through deduction from their monthly paycheck.
4. Excise tax – excise taxes are taxes paid when you purchase certain good particularly gasoline and other fuels. They are usually included in the price of the commodity a certain business buys. There are several broad categories of excise tax which includes the following:
- Fuel taxes
- Air transportation and communications taxes
- Manufacturer taxes
- Environmental taxes
- Trailers, heavy trucks and tractors’ first retail sale taxes
Generally, the business operation determines when and what type of tax a person has to pay.
In conclusion, it is part of your duties and responsibilities as businessman to settle all your business taxation responsibilities on time. In fact, tax evasion is greatly considered as a crime by several states and correspond a certain amount of penalty. However, paying taxes is not only to get avoided from legal penalties, but to help the government to raise funds for the public services.