Filing taxes is something that is dreaded by the common man every year. However it seems our ancestors would be as dreadful as we are since the history of tax can be traced to as long back as 3000 BC in ancient Egypt. Tax was historically collected from the people in the form of a percentage of the crop yield, and this had to be handed over to the Pharaoh. Taxes have evolved over the years, and in modern taxation systems, tax is solely collected in the form of money, and is usually performed by a government appointed agency.
While the collection of tax has always been debated, funds collected by the taxation process are used for various purposes mainly for providing greater benefits and improve the level of basic services such as water, energy and waste management for the people. The rate of tax is fixed by the government, but can be increased depending on the economic condition of a nation. During the eighteenth century, England was at war, and the tax burden increased dramatically by 85% over this period.
In the modern society, taxes can be seen everywhere and they have become a part of life. With the introduction of the Value Added Tax (VAT) in 1954, all commercial activities were tagged with the tax label, and the consumer had to pay a tax for any commodity that he or she buys. History however has seen the weirdest of tax schemes. In Britain, a tax was imposed on windows by William Pitt, as it was considered to be a luxury possession. Nero the Roman Emperor taxed urine, as it was used as a raw material for a number of chemical processes. Peter the Great, the czar who modernized modern Russia is said to have introduced soul tax, for the maintenance of armed forces.
Tax havens evolved as a direct economic response to the principle of taxes, as places where taxes were levied at an extremely low rate or not levied at all. Tax havens can be traced to ancient Greece, where sea traders deposited foreign goods in Greek island to evade the two percent tax imposed by Athens. The oldest tax haven is said to be the Channel Islands dating as far back as 1006 A.D, although economic commentators suggest that the first “true” tax haven was Switzerland. Most European governments had to pay for reconstruction costs for damages suffered during the World War I using the taxpayer’s money, but Switzerland’s neutral policy during the war allowed it to maintain a low level of tax.
Evasion of tax is considered to be a crime, and the non-paying entity or individual can be subject to civil penalties such as fines or forfeiture or criminal penalties such as incarceration. In spite of this, individuals and companies try to evade tax, considering it to be a burden on their income. Individuals have tried various means to evade tax, with the strangest being a person trying to claim his dog as a dependent. Yet another instance saw a man trying to save tax for the money that he had made from donating sperms, claiming that he had been depleted.
With economies on a downturn, tax is becoming the focal point of all discussions on reviving shattered economic conditions. Council taxes have been increased in some places to bring some money in the exhausted council coffers, and Japan is considering cutting tax rates to boost economic demand. Tax has never been so much in the limelight, and it is becoming increasingly clear that this small three letter word will play a big role in the months to come.