Family planning

From Wikipedia, the free encyclopedia

 

Combined oral contraceptives. Introduced in 1960, "the Pill" has played an instrumental role in family planning for decades.

 

Family planning services are defined as "educational, comprehensive medical or social activities which enable individuals, including minors, to determine freely the number and spacing of their children and to select the means by which this may be achieved". Family planning may involve consideration of the number of children a woman wishes to have, including the choice to have no children, as well as the age at which she wishes to have them. These matters are influenced by external factors such as marital situation, career considerations, financial position, and any disabilities that may affect their ability to have children and raise them. If sexually active, family planning may involve the use of contraception and other techniques to control the timing of reproduction.

Other aspects of family planning include sex education, prevention and management of sexually transmitted infections, pre-conception counseling and management, and infertility management. Family planning, as defined by the United Nations and the World Health Organization, encompasses services leading up to conception. Abortion is not considered a component of family planning, although access to contraception and family planning reduces the need for abortion.

Family planning is sometimes used as a synonym or euphemism for access to and the use of contraception. However, it often involves methods and practices in addition to contraception. Additionally, there are many who might wish to use contraception but are not, necessarily, planning a family (e.g., unmarried adolescents, young married couples delaying childbearing while building a career); family planning has become a catch-all phrase for much of the work undertaken in this realm. Contemporary notions of family planning, however, tend to place a woman and her childbearing decisions at the center of the discussion, as notions of women's empowerment and reproductive autonomy have gained traction in many parts of the world. It is most usually applied to a female-male couple who wish to limit the number of children they have and/or to control the timing of pregnancy (also known as spacing children).

Purposes

In 2006, the US Centers for Disease Control (CDC) issued a recommendation, encouraging men and women to formulate a reproductive life plan, to help them in avoiding unintended pregnancies and to improve the health of women and reduce adverse pregnancy outcomes.

Raising a child requires significant amounts of resources: time, social, financial, and environmental. Planning can help assure that resources are available. The purpose of family planning is to make sure that any couple, man, or woman who has a child has the resources that are needed in order to complete this goal. With these resources a couple, man or woman can explore the options of natural birth, surrogacy, artificial insemination, or adoption. In the other case, if the person does not wish to have a child at the specific time, they can investigate the resources that are needed to prevent pregnancy, such as birth control, contraceptives, or physical protection and prevention. 

There is no clear social impact case for or against conceiving a child. Individually, for most people, bearing a child or not has no measurable impact on person well-being. A review of the economic literature on life satisfaction shows that certain groups of people are much happier without children:

• Single parents
• Fathers who both work and raise the children equally.
• Singles
• The divorced
• The poor
• Those whose children are older than 3
• Those whose children are sick

However, both adoptees and the adopters report that they are happier after adoption. Adoption may also insure against costs of prenatal or childhood disability which can be anticipated with prenatal screening or with reference to parental risk factors. For instance, older fathers and/or Advanced maternal age increase the risk of numerous health issues in their offspring, including autism and schizophrenia.

Resources

When women can pursue additional education and paid employment, families can invest more in each child. Children with fewer siblings tend to stay in school longer than those with many siblings. Leaving school in order to have children has long-term implications for the future of these girls, as well as the human capital of their families and communities. Family planning slows unsustainable population growth which drains resources from the environment, and national and regional development efforts.

Health

The WHO states about maternal health that:

"Maternal health refers to the health of women during pregnancy, childbirth and the postpartum period. While motherhood is often a positive and fulfilling experience, for too many women it is associated with suffering, ill-health and even death."

About 99% of maternal deaths occur in less developed countries; less than one half occur in sub-Saharan Africa and almost a third in South Asia.

Both early and late motherhood have increased risks. Young teenagers face a higher risk of complications and death as a result of pregnancy. Waiting until the mother is at least 18 years old before trying to have children improves maternal and child health.

Also, if additional children are desired after a child is born, it is healthier for the mother and the child to wait at least 2 years after the previous birth before attempting to conceive (but not more than 5 years). After a miscarriage or abortion, it is healthier to wait at least 6 months.

Joselyne When planning a family, women should be aware that reproductive risks increase with the age of the woman. Like older men, older women have a higher chance of having a child with autism or Down syndrome, the chances of having multiple births increases, which cause further late-pregnancy risks, they have an increased chance of developing gestational diabetes, the need for a Caesarian section is greater, older women's bodies are not as well-suited for delivering a baby. The risk of prolonged labor is higher. Older mothers have a higher risk of a long labor, putting the baby in distress. 

Placard showing negative effects of lack of family planning and having too many children and infants (Ethiopia)

Modern methods

Modern methods of family planning include birth control, assisted reproductive technology and family planning programs. 

In regard to the use of modern methods of contraception, The United Nations Population Fund (UNFPA) says that, “Contraceptives prevent unintended pregnancies, reduce the number of abortions, and lower the incidence of death and disability related to complications of pregnancy and childbirth.”  UNFPA states that, “If all women with an unmet need for contraceptives were able to use modern methods, an additional 24 million abortions (14 million of which would be unsafe), 6 million miscarriages, 70,000 maternal deaths and 500,000 infant deaths would be prevented.” 

In cases where couples may not want to have children just yet, family planning programs help a lot. Federal family planning programs reduced childbearing among poor women by as much as 29 percent, according to a University of Michigan study.

Adoption is another option used to build a family. There are seven steps that one must make towards adoption. You must decide to pursue an adoption, apply to adopt, complete an adoption home study, get approved to adopt, be matched with a child, receive an adoptive placement, and then legalize the adoption.

Contraception

Placard showing positive effects of family planning (Ethiopia)

 

A number of contraceptive methods are available to prevent unwanted pregnancy. There are natural methods and various chemical-based methods, each with particular advantages and disadvantages. Behavioral methods to avoid pregnancy that involve vaginal intercourse include the withdrawal and calendar-based methods, which have little upfront cost and are readily available. Long-acting reversible contraceptive methods, such as intrauterine device (IUD) and implant are highly effective and convenient, requiring little user action, but do come with risks. When cost of failure is included, IUDs and vasectomy are much less costly than other methods. In addition to providing birth control, male and/or female condoms protect against sexually transmitted diseases (STD). Condoms may be used alone, or in addition to other methods, as backup or to prevent STD. Surgical methods (tubal ligation, vasectomy) provide long-term contraception for those who have completed their families.

Assisted reproductive technology

When, for any reason, a woman is unable to conceive by natural means, she may seek assisted conception. For example, some families or women seek assistance through surrogacy, in which a woman agrees to become pregnant and deliver a child for another couple or person.

There are two types of surrogacy: traditional and gestational. In traditional surrogacy, the surrogate uses her own eggs and carries the child for her intended parents. This procedure is done in a doctor's office through IUI. This type of surrogacy obviously includes a genetic connection between the surrogate and the child. Legally, the surrogate will have to disclaim any interest in the child to complete the transfer to the intended parents. A gestational surrogacy occurs when the intended mother's or a donor egg is fertilized outside the body and then the embryos are transferred into the uterus. The woman who carries the child is often referred to as a gestational carrier. The legal steps to confirm parentage with the intended parents are generally easier than in a traditional because there is no genetic connection between child and carrier.

Sperm donation is another form of assisted conception. It involves donated sperm being used to fertilise a woman's ova by artificial insemination (either by intracervical insemination or intrauterine insemination) and less commonly by invitro fertilization (IVF), but insemination may also be achieved by a donor having sexual intercourse with a woman for the purpose of achieving conception. This method is known as natural insemination (NI).

Mapping of a woman's ovarian reserve, follicular dynamics and associated biomarkers can give an individual prognosis about future chances of pregnancy, facilitating an informed choice of when to have children.

Finances

Family planning is among the most cost-effective of all health interventions. "The cost savings stem from a reduction in unintended pregnancy, as well as a reduction in transmission of sexually transmitted infections, including HIV".

Childbirth and prenatal health care cost averaged $7,090 for normal delivery in the United States in 1996. U.S. Department of Agriculture estimates that for a child born in 2007, a U.S. family will spend an average of $11,000 to $23,000 per year for the first 17 years of child's life. (Total inflation-adjusted estimated expenditure: $196,000 to $393,000, depending on household income.) Breaks down cost by age, type of expense, region of country. Adjustments for number of children (one child — spend 24% more, 3 or more spend less on each child.) 

Investing in family planning has clear economic benefits and can also help countries to achieve their “demographic dividend,” which means that countries productivity is able to increase when there are more people in the workforce and less dependents. UNFPA says that, “For every dollar invested in contraception, the cost of pregnancy-related care is reduced by $1.47.”

UNFPA states that,

The lifetime opportunity cost related to adolescent pregnancy – a measure of the annual income a young mother misses out on over her lifetime – ranges from 1 per cent of annual gross domestic product in a large country such as China to 30 per cent of annual GDP in a small economy such as Uganda. If adolescent girls in Brazil and India were able to wait until their early twenties to have children, the increased economic productivity would equal more than $3.5 billion and $7.7 billion, respectively.

In the Copenhagen Consensus produced by Nobel laureates in collaboration with the UN, universal access to contraception ranks as the third highest policy initiative in social, economic, and environmental benefits for every dollar spent. Providing universal access to sexual and reproductive health services and eliminating the unmet need for contraception will result in 640,000 fewer newborn deaths, 150,000 fewer maternal deaths and 600,000 fewer children who lose their mother. At the same time, societies will experience fewer dependents and more women in the workforce, driving faster economic growth. The costs of universal access to contraceptives will be about $3.6 billion/year, but the benefits will be more than $400 billion annually and cut maternal deaths by 150,000.

Fertility Awareness

Fertility awareness refers to a set of practices used to determine the fertile and infertile phases of a woman's menstrual cycle. Fertility awareness methods may be used to avoid pregnancy, to achieve pregnancy, or as a way to monitor gynecological health. Methods of identifying infertile days have been known since antiquity, but scientific knowledge gained during the past century has increased the number and variety of methods. Various methods can be used and the Symptothermal method has achieved a success rates over 99% if used properly.

These methods are used for various reasons: There are no drug-related side effects, it is free to use and only has a small upfront cost, it works both ways, or for religious reasons (the Catholic Church promotes this as the only acceptable form of family planning calling it Natural Family Planning). Its disadvantages are that either abstinence or backup method is required on fertile days, typical use is often less effective than other methods, and it does not protect against sexually transmitted disease.

Media campaign

Recent research based on nationally representative surveys supports a strong association between family planning mass media campaigns and contraceptive use, even after social and demographic variables are controlled for. The 1989 Kenya Demographic and Health Survey found half of the women who recalled hearing or seeing family planning messages in radio, print, and television consequently used contraception, compared with 14% who did not recall family planning messages in the media, even after age, residence and socioeconomic status were taken into account.

The Health Education Division of the Ministry of Health conducted the Tanzanian Family Planning Communication Project from January 1991 through December 1994, a project funded by the U.S. Agency for International Development (USAID). The program intended to educate both men and men of reproductive age about modern contraception methods. The major media channels and products included radio spots, radio series drama, Green Star logo promotional activities (identifies sites where family planning services are available), posters, leaflets, newspapers, and audio cassettes. In conjunction with other non-project interventions sponsored by other Tanzanian and international agencies from 1992–1994, contraception use among women ages 15–49 increased from 5.9% to 11.3%. The total fertility rate dropped from 6.3 lifetime births per individual in 1991–1992 to 5.8 in 1994.

Providers

Direct government support

Direct government support for family planning includes providing family planning education and supplies through government-run facilities such as hospitals, clinics, health posts and health centers and through government fieldworkers.

In 2013, 160 out of 197 governments provided direct support for family planning. Twenty countries only provided indirect support through private sector or NGOs. Seventeen governments did not support family planning. Direct government support has continued to increase in developing countries from 82% in 1996 to 93% in 2013, but is declining in developed countries from 58% in 1976 to 45% in 2013. Ninety-seven percent of Latin America and the Caribbean, 96% of Africa, and 94% of Oceania governments provided direct support for family planning. In Europe, only 45% of governments directly support family planning. Out of 172 countries with available data in 2012, 152 countries had implemented realistic measures to increase women's access to family planning methods from 2009–2014. This included 95% of developing nations and 65% of developed nations.

Private sector

The private sector includes nongovernmental and faith-based organizations who typically provide free or subsidized services to for-profit medical providers, pharmacies and drug shops. The private sector accounts for approximately two-fifths of contraceptive suppliers worldwide. Private organizations are able to provide sustainable markets for contraceptive services through social marketing, social franchising, and pharmacies.

Social marketing employs marketing techniques to achieve behavioral change while making contraceptives available. By utilizing private providers, social marketing reduces geographic and socioeconomic disparities and reaches men and boys.

Social franchising designs a brand for contraceptives in order to expand the market for contraceptives.

Drug shops and pharmacies provide health care in rural areas and urban slums where there are few public clinics. They account for most of the private sector provided contraception in sub-Saharan Africa, especially for condoms, pills, injectables and emergency contraception. Pharmacy supply and low-cost emergency contraception in South Africa and many low-income countries increased access to contraception.

Workplace policies and programs help expand access to family planning information. The Family Guidance Association of Ethiopia, which works with more than 150 enterprises to improve health services, analyzed health outcomes in one factory over 10 years and found reductions in unintended pregnancies and STIs as well as sick leave. Contraception use rose from 11% to 90% between 1997 and 2000. In 2016, the Bangladesh Garment Manufacturers Export Association partnered with family planning organizations to provide training and free contraceptives to factory clinics, creating the potential to reach thousands of factory employees.

Non-governmental organizations (NGOs)

NGOs may meet the needs of local poor by encouraging self-help and participation, understanding social and cultural subtleties, and working around red tape when governments do not adequately meet the needs of their constituents. A successful NGO can uphold family planning services even when a national program is threatened by political forces. NGOs can contribute to informing government policy, developing programs, or carry out programs that the government will not or can not implement.

International oversight

Family planning programs are now considered a key part of a comprehensive development strategy. The United Nations Millennium Development Goals (now superseded by the Sustainable Development Goals) reflects this international consensus. The 2012 London Summit on Family Planning, hosted by the UK government and the Bill and Melinda Gates Foundation, affirmed political commitments and increased funds for the project, strengthening the role of family planning in global development. Family Planning 2020 is the result of the 2012 London Summit on Family Planning where more than 20 governments made commitments to address the policy, financing, delivery, and socio-cultural barriers to women accessing contraception formation and services. FP2020 is a global movement that supports the rights of women to decide for themselves whether, when and how many children they want to have. The commitments of the program are specific to each country, as compared to the generalized main goals of the 1995 conference program of action. FP2020 is hosted by the United Nations Foundation and operates in support of the UN Secretary-General's Global Strategy for Women's, Children's and Adolescent's Health. 

The world's largest international source of funding for population and reproductive health programs is the United Nations Population Fund (UNFPA). In 1994, the International Conference on Population and Development set the main goals of its Program of Action as:

• Universal access to reproductive health services by 2015
• Universal primary education and ending the gender gap in education by 2015
• Reducing maternal mortality by 75% by 2015
• Reducing infant mortality
• Increasing life expectancy at birth
• Reducing HIV infection rates in persons aged 15–24 years by 25% in the most-affected countries by 2005, and by 25% globally by 2010

The World Health Organization (WHO) and World Bank estimate that $3 per person per year would provide basic family planning, maternal and neonatal health care to women in developing countries. This would include contraception, prenatal, delivery, and post-natal care in addition to postpartum family planning and the promotion of condoms to prevent sexually transmitted infections.

Coercive interference with family planning

Forced sterilization

Compulsory or forced sterilization programs or government policy attempt to force people to undergo surgical sterilization without their freely given consent. People from marginalized communities are at most risk of forced sterilization. Forced sterilization has occurred in recent years in Eastern Europe (against Roma women), and in Peru (during the 1990s against indigenous women). China's one-child policy was intended to limit the rise in population numbers, but in some situations involved forced sterilisation.

Sexual violence

Rape can result in a pregnancy. Rape can occur in a variety of situations, including war rape, forced prostitution and marital rape.

 

In Rwanda, the National Population Office has estimated that between 2,000 and 5,000 children were born as a result of sexual violence perpetrated during the genocide, but victims' groups gave a higher estimated number of over 10,000 children.

Human rights, development and climate

Access to safe, voluntary family planning is a human right and is central to gender equality, women's empowerment and poverty reduction. The United Nations Population Fund (UNFPA) says that, “Some 225 million women who want to avoid pregnancy are not using safe and effective family planning methods, for reasons ranging from lack access to information or services to lack of support from their partners or communities.” UNFPA says that, “Most of these women with an unmet need for contraceptives live in 69 of the poorest countries on earth.” 

Over the past 50 years, right-based family planning has enabled the cycle of poverty to be broken resulting in millions of women and children's lives being saved.

UNFPA says that,

Global consensus that family planning is a human right was secured at the 1994 International Conference on Population and Development, in Principle 8 of the Programme of Action: All couples and individuals have the basic right to decide freely and responsibly the number and spacing of their children and to have the information, education, and means to do so.

As part of the United Nations Millennium Development Goals (MDGs) universal access to family planning is one of the key factors contributing to development and reducing poverty. Family planning creates benefits in areas such as, gender quality and women's health, access to sexual education and higher education, and improvements in maternal and child health. Note that the Millennium Development Goals have been superseded by the Sustainable Development Goals. 

UNFPA and the Guttmacher Institute say that,

Serving all women in developing countries that currently have an unmet need for modern contraceptives would prevent an additional 54 million unintended pregnancies, including 21 million unplanned births, 26 million abortions and seven million miscarriages; this would also prevent 79,000 maternal deaths and 1.1 million infant deaths.

Since climate change is directly proportional to the number of humans, family planning has a significant impact on climate change. The research project Drawdown estimates that family planning is the seventh most efficient action against climate change (ahead of solar farms, nuclear power, afforestation and many other actions).

Quality-quantity trade-off

Having children produces a quality-quantity trade-off: parents need to decide how many children to have and how much to invest in the future of each child. The increasing marginal cost of quality (child outcome) with respect to quantity (number of children) creates a trade-off between quantity and quality. The quantity-quality trade-off means that policies that raise benefits of investing in child quality will generate higher levels of human capital, and policies that lower the costs of having children may have unintended adverse consequences on long-run economic growth. When deciding how many children, parents are influenced by their income level, perceived return to human capital investment, and cultural norms related to gender equality. Controlling birth rates allows families to raise the future earnings power of the next generation.

Many empirical studies have tested the quantity-quality trade-off and either observed a negative correlation between family size and child quality or did not find a correlation. Most studies treat family size as an exogenous variable because parents choose childbearing and child outcome and therefore cannot establish causality. They are both influenced by typically non-observable parental preferences and household characteristics, but some studies observe proxy variables such as investment in education.

Developing countries

High fertility countries have 18% of the world's population but contribute 38% of the population growth. In order to become rich, resources must be re-appropriated to increase income per person rather than supporting larger populations. As populations increase, governments must accommodate increasing investments in health and human capital and institutional reforms to address demographic divides. Reducing the cost of human capital can be implemented by subsidizing education, which raises the earning power of women and the opportunity cost of having children, consequently lowering fertility. Access to contraceptives may also yield lower fertility rates: having more children than expected constrains the individual from attaining their desired level of investment in child quantity and quality. In high fertility contexts, reduced fertility may contribute to economic development by improving child outcomes, reducing maternal mortality and increasing female human capital. 

Dang and Rogers (2015) show that in Vietnam, family planning services increased investment in education by lowering the relative cost of child quality and encouraging families to invest in quality. By observing the distance to the nearest family planning center and the general education expenditure on each child, Dang and Rogers provide evidence that parents in Vietnam are making a child quality-quantity trade-off.

Demand for Private Tutoring with and without access to family planning

Developed countries

Currently, developed countries have experienced rising economic growth and falling fertility. As a result of the demographic transition that takes place when countries become rich, developed countries have an increasing proportion of retired people which raises the burden on the workforce population to support pensions and social programs. Encouraging higher fertility as a solution may risk reversing the benefits for increased child investment and female labor force participation have had on economic growth. Increasing high skill migration may be an effective way to increase the return to education leading to lower fertility and a greater supply of highly skilled individuals.

Demand for family planning

214 million women of reproductive age in developing countries who do not want to become pregnant are not using a modern contraceptive method. This could be a result of a limited choice of methods, limited access to contraception, fear of side-effects, cultural or religious opposition, poor quality of available services, user or provider bias, or gender-based barriers. In Africa, 24.2% of women of reproductive age do not have access to modern contraction. In Asia, Latin America, and the Caribbean, the unmet need is 10–11%. Meeting the unmet need for contraception could prevent 104,000 maternal deaths per year, a 29% reduction of women dying from postpartum hemorrhage or unsafe abortions.

According to the United Nations Department of Economic and Social Affairs: Population Division, 64% of the world uses contraceptives, 12% of the world population's need for contraceptives is unmet. In the least developed countries, 22% of the population do not have access to contraceptives, and 40% use contraceptives. The unmet need for modern contraceptives is very high in sub-Saharan Africa, south Asia, and western Asia. Africa has the lowest rate of contraceptive use (33%) and highest rate of unmet need (22%). Northern America has the highest rate of contraceptive use (73%) and the lowest unmet need (7%). Latin America and the Caribbean follows closely behind with 73% contraceptive use and 11% unmet need. Europe and Asia are on par: Europe has a 69% contraceptive use rate and 10% unmet need, Asia has a 68% contraceptive use and 10% unmet need. Although unmet need is lower in Asia because of the large population in this region, the number of women with unmet need is 443 million, compared to 74 million in Europe Oceania has a 59% contraceptive use rate and 15% unmet need. When comparing the regions within these continents, Eastern Asia ranks the highest rate of contraceptive use (82%) and lowest unmet need (5%). Western Africa ranks the lowest rate of contraceptive use (17%). Middle Africa ranks the highest unmet need (26%). Unmet need is higher among poorer women; in Bolivia and Ethiopa unmet need is tripled and doubled among poor populations. However, in the Democratic Republic of Congo and Liberia the rates of unmet need are different by 1–2 percentage points. This suggests that as wealthier women begin to want smaller families, they will increasingly seek out family planning methods.

United Nations Department of Economic and Social Affairs, Population Division, "Trends in Contraceptive Use Worldwide 2015" New York: United Nations, 2015.

 

Substantial unmet need has provoked family planning programs by governments and donors, but the impact of family planning programs on fertility and contraceptive use remains somewhat unsettled. "Demand theory" argues that in traditional agricultural societies, fertility rates are driven by the desire to offset high mortality, thus as society modernizes, the costs of raising children increases, reducing their economic value, and resulting in a decline in desired number of children. Under this theory, family planning programs will have a marginal impact. Bongaarts (2014) shows that using a country case study approach, both stronger and weaker family programs reduce the unmet need for contraceptives and increases use by making modern contraceptives more widely available and removing obstacles to use. Also, the demand that is satisfied and the proportion of women using modern methods increased. The programs may have an additional effect of diffusing the ideas related to family planning and thus raising the demand for contraception. As a result, a small decrease in unmet need may be offset by a rise in demand. Nonetheless, even in countries where it is assumed that family programs will make a marginal impact, Bongaarts shows that family planning programs can potentially increase contraceptive use and increase/decrease demand depending on the preexisting attitudes of the community.

Regional variations

A family planning facility in Kuala Terengganu, Malaysia

Africa

Most of the countries with lowest rates of contraceptive use, highest maternal, infant, and child mortality rates, and highest fertility rates are in Africa. Only about 30% of all women use birth control, although over half of all African women would like to use birth control if it was available to them. The main problems that preventing access to and use of birth control are unavailability, poor health care services, spousal disapproval, religious concerns, and misinformation about the effects of birth control. The most available type of birth control is condoms. A rapidly growing population coupled with an increase in preventable diseases means countries in Sub-Saharan Africa face an increasingly younger population.

China

China's Family planning policy forced couples to have no more than one child. Beginning in 1979 and being officially phased out in 2015, the policy was instated to control the rapid population growth that was occurring in the nation at that time. With the rapid change in population, China was facing many impacts, including poverty and homelessness. As a developing nation, the Chinese government was concerned that a continuation of the rapid population growth that had been occurring would hinder their development as a nation. The process of family planning varied throughout China, as people differed in their responsiveness to the one-child policy, based on location and socioeconomic status. For example, many families in the cities accepted the policy more readily based on the lack of space, money, and resources that often occurs in the cities. Another example can be found in the enforcement of this rule; people living in rural areas of China were, in some cases, permitted to have more than one child, but had to wait several years after the birth of the first one. However, the people in rural areas of China were more hesitant in accepting this policy. China's population policy has been credited with a very significant slowing of China's population growth which had been higher before the policy was implemented. However, the policy has come under criticism that it has resulted in the abuse of women. Often implementation of the policy has involved forced abortions, forced sterilization, and infanticides. That families desired a male child had a part to play in the number of infanticides. The number of girls that die within their first year of birth is twice that of boys. Another drawback of the policy is that China's elderly population is now increasing rapidly. However, while the punishment of "unplanned" pregnancy is a large fine, both forced abortion and forced sterilization can be charged with intentional assault, which is punished with up to ten years' imprisonment. Another issue that is raised in the one-child policy in China is the information in regards to naturally giving birth to twins or triplets. If this situation arises, the family is allowed to keep the children because of the natural causes of this impregnation.

Family planning in China had its benefits, and its drawbacks. For example, it helped reduce the population by about 300 million people in its first 20 years. A drawback is that there are now millions of sibling-less people, and in China siblings are very important. Once the parent generation gets older, the children help take care of them, and the work is usually equally split among the siblings. Another benefit of the implementation of the one-child law is that it reduced the fertility rate from about 2.75 children born per woman, to about 1.8 children born per woman in the 1979.

Hong Kong

In Hong Kong, the Eugenics League was found in 1936, which became The Family Planning Association of Hong Kong in 1950. The organisation provides family planning advice, sex education, birth control services to the general public of Hong Kong. In the 1970s, due to the rapidly rising population, it launched the "Two Is Enough" campaign, which reduced the general birth rate through educational means.

The Family Planning Association of Hong Kong, Hong Kong's national family planning association, founded the International Planned Parenthood Federation with its counterparts in seven other countries.

India

Family planning in India is based on efforts largely sponsored by the Indian government. In the 1965–2009 period, contraceptive usage has more than tripled (from 13% of married women in 1970 to 48% in 2009) and the fertility rate has more than halved (from 5.7 in 1966 to 2.6 in 2009), but the national fertility rate is still high enough to cause long-term population growth. India adds up to 1,000,000 people to its population every 15 days.

Iran

While Iran's population grew at a rate of more than 3% per year between 1956 and 1986, the growth rate began to decline in the late 1980s and early 1990s after the government initiated a major population control program. By 2007 the growth rate had declined to 0.7 percent per year, with a birth rate of 17 per 1,000 persons and a death rate of 6 per 1,000. Reports by the UN show birth control policies in Iran to be effective with the country topping the list of greatest fertility decreases. UN's Population Division of the Department of Economic and Social Affairs says that between 1975 and 1980, the total fertility number was 6.5. The projected level for Iran's 2005 to 2010 birth rate is fewer than two.

In late July 2012, Supreme Leader Ali Khamenei described Iran's contraceptive services as "wrong," and Iranian authorities are slashing birth-control programs in what one Western newspaper (USA Today) describes as a "major reversal" of its long standing policy. Whether program cuts and high-level appeals for bigger families will be successful is still unclear.

Ireland

The sale of contraceptives was illegal in Ireland from 1935 until 1980, when it was legalized with strong restrictions, later loosened. It has been argued that the resulting demographic dividend played a role in the economic boom in Ireland that began in the 1990s and ended abruptly in 2008 (the Celtic tiger) was in part due to the legalisation of contraception in 1979 and subsequent decline in the fertility rate. In Ireland the ratio of workers to dependents increased due to lower fertility — the reality of which has been questioned — but was raised further by increased female labor market participation.

Pakistan

In agreement with the 1994 International Conference on Population and Development in Cairo, Pakistan pledged that by 2010 it would provide universal access to family planning. Additionally, Pakistan's Poverty Reduction Strategy Paper has set specific national goals for increases in family planning and contraceptive use. In 2011 just one in five Pakistani women ages 15 to 49 uses modern birth control. Contraception is shunned under traditional social mores that are fiercely defended as fundamentalist Islam gains strength.

Russia

According to a 2004 study, current pregnancies were termed "desired and timely" by 58% of respondents, while 23% described them as "desired, but untimely", and 19% said they were "undesired". As of 2004, the share of women of reproductive age using hormonal or intrauterine birth control methods was about 46% (29% intrauterine, 17% hormonal). During the soviet era high quality contraceptives were difficult to obtain, and abortion became the most common way of preventing unwanted births. Since the dissolution of the Soviet Union abortion rates have fallen considerably, but they are still higher than rates in many developed countries.

Philippines

In the Philippines, the Responsible Parenthood and Reproductive Health Act of 2012 guarantees universal access to methods on contraception, fertility control, sexual education, and maternal care. While there is general agreement about its provisions on maternal and child health, there is great debate on its mandate that the Philippine government and the private sector will fund and undertake widespread distribution of family planning devices such as condoms, birth control pills, and IUDs, as the government continues to disseminate information on their use through all health care centers.

Thailand

In 1970, Thailand's government declared a population policy that would battle the country's rapid population growth rate. This policy set a 5-year goal to reduce Thailand's population growth rate from 3 percent to 2.5 percent through methods such as spreading family planning awareness to rural families, or integrating family planning activities into maternal and child healthcare education.^[82] Public figures such as Mechai Viravaidya helped spread family planning awareness through public speakings and charitable activities.

Singapore

Population control in Singapore spans two distinct phases: first to slow and reverse the boom in births that started after World War II; and then, from the 1980s onwards, to encourage parents to have more children because birth numbers had fallen below replacement levels.

United Kingdom

Contraception has been available for free under the National Health Service since 1974, and 74% of reproductive-age women use some form of contraception. The levonorgestrel intrauterine system has been massively popular. Sterilization is popular in older age groups, among those 45–49, 29% of men and 21% of women have been sterilized. Female sterilization has been declining since 1996, when the intrauterine system was introduced. Emergency contraception has been available since the 1970s, a product was specifically licensed for emergency contraception in 1984, and emergency contraceptives became available over the counter in 2001. Since becoming available over the counter it has not reduced the use of other forms of contraception, as some moralists feared it might. In any year only 5% of women of childbearing age use emergency hormonal contraception.

Despite widespread availability of contraceptives, almost half of pregnancies were unintended in 2005. Abortion was legalized in 1967.

United States

Despite the availability of highly effective contraceptives, about half of U.S. pregnancies are unintended. Highly effective contraceptives, such as IUD, are underused in the United States. Increasing use of highly effective contraceptives could help meet the goal set forward in Healthy People 2020 to decrease unintended pregnancy by 10%. Cost to the user is one factor preventing many American women from using more effective contraceptives. Making contraceptives available without a copay increases use of highly effective methods, reduces unintended pregnancies, and may be instrumental in achieving the Healthy People 2020 goal.

In the United States, contraceptive use saves about $19 billion in direct medical costs each year. Title X of the Public Health Service Act, is a U.S. government program dedicated to providing family planning services for those in need. But funding for Title X as a percentage of total public funding to family planning client services has steadily declined from 44% of total expenditures in 1980 to 12% in 2006. Current funding for Title X is less than 40% of what is needed to meet the need for publicly funded family planning. Title X would need $737 million annually to meet the need for family planning services. Only 6.2 million women accessed publicly funded services from 10,700 clinics in 2015, despite an estimated 20 million women who could benefit. 

Clinics funded by Title X served 3.8 million of these women with access to services.In 2015, publicly funded contraceptive services helped women prevent 1.9 million unintended pregnancies; 876,100 of these would have resulted in unplanned births and 628,000 abortions. Without publicly funded contraceptive services, the rates of unintended pregnancies, unplanned births and abortions would have been 67% higher. The rates for teens would have been 102% higher. Title X funded programs saw 1.2 million fewer patients in 2015 compared to 2010 as funding decreased by $31 million. In 2015, an estimated 2.4 million additional women received Medicaid-funded contraceptive services from private doctors.

Medicaid has increased from 20% to 71% from 1980 to 2006. In 2006, Medicaid contributed $1.3 billion to public family planning. The $1.9 billion spent on publicly funded family planning in 2008 saved an estimated $7 billion in short-term Medicaid costs. Such services helped women prevent an estimated 1.94 million unintended pregnancies and 810,000 abortions.

About 3 out of 10 women in the United States have an abortion by the time they are 45 years old.

A 2017 paper found that parents' access to family planning programs had a positive economic impact on their subsequent children: " Using the county-level introduction of U.S. family planning programs between 1964 and 1973, we find that children born after programs began had 2.8% higher household incomes. They were also 7% less likely to live in poverty and 12% less likely to live in households receiving public assistance. After accounting for selection, the direct effects of family planning programs on parents’ incomes account for roughly two thirds of these gains."

Uzbekistan

In Uzbekistan the government has pushed for uteruses to be removed from women in order to forcibly sterilize them.

Obstacles to family planning

There are many reasons as to why women do not use contraceptives. These reasons include logistical problems, scientific and religious concerns, limited access to transportation in order to access health clinics, lack of education and knowledge and opposition by partners, families or communities plus the fact that no one is able to control their fertility beyond basic behavior involving conception. 

UNFPA says that “efforts to increase access must be sensitive to cultural and national contexts, and must consider economic, geographic and age disparities within countries.” 

UNFPA states that, “Poorer women and those in rural areas often have less access to family planning services. Certain groups — including adolescents, unmarried people, the urban poor, rural populations, sex workers and people living with HIV also face a variety of barriers to family planning. This can lead to higher rates of unintended pregnancy, increased risk of HIV and other STIs, limited choice of contraceptive methods, and higher levels of unmet need for family planning.” 

For national, international, or local health programs involved in family planning, the use of standard indicators is increasingly encouraged, to track barriers to effective family planning along with the efficacy, uptake, and provision of family planning services.

World Contraception Day

September 26 is designated as World Contraception Day, devoted to raising awareness of contraception and improving education about sexual and reproductive health, with a vision of "a world where every pregnancy is wanted". It is supported by a group of international NGOs, including: 

Asian Pacific Council on Contraception, Centro Latinamericano Salud y Mujer, European Society of Contraception and Reproductive Health, German Foundation for World Population, International Federation of Pediatric and Adolescent Gynecology, International Planned Parenthood Federation, Marie Stopes International, Population Services International, The Population Council, The USAID, Women Deliver.

Abortion

Some pro-life groups claim that the United Nations and World Health Organization advocate abortion as a form of family planning. In fact, the United Nations Population Fund explicitly states it “never promotes abortion as a form of family planning.” The World Health Organization states that "Family planning/contraception reduces the need for abortion, especially unsafe abortion."

The campaign to conflate contraception and abortion is rooted on the assertion that contraception ends, rather than prevents, pregnancy. According to an amicus brief submitted to the U.S. Supreme Court in October 2013 led by Physicians for Reproductive Health and the American College of Obstetricians and Gynecologists, a contraceptive method prevents pregnancy by interfering with fertilization, or implantation. Abortion, separate from contraceptives, ends an established pregnancy.

Tax

From Wikipedia, the free encyclopedia

 

A tax (from the Latin taxo) is a compulsory financial charge or some other type of levy imposed upon a taxpayer (an individual or legal entity) by a governmental organization in order to fund various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent. The first known taxation took place in Ancient Egypt around 3000–2800 BC.

Most countries have a tax system in place to pay for public, common or agreed national needs and government functions. Some levy a flat percentage rate of taxation on personal annual income, but most scale taxes based on annual income amounts. Most countries charge a tax on individuals income as well as on corporate income. Countries or subunits often also impose wealth taxes, inheritance taxes, estate taxes, gift taxes, property taxes, sales taxes, payroll taxes or tariffs.

In economic terms, taxation transfers wealth from households or businesses to the government. This has effects which can both increase and reduce economic growth and economic welfare. Consequently, taxation is a highly debated topic.

Overview

Pieter Brueghel the Younger, The tax collector's office, 1640

 

The legal definition, and the economic definition of taxes differ in some ways such as economists do not regard many transfers to governments as taxes. For example, some transfers to the public sector are comparable to prices. Examples include, tuition at public universities, and fees for utilities provided by local governments. Governments also obtain resources by "creating" money and coins (for example, by printing bills and by minting coins), through voluntary gifts (for example, contributions to public universities and museums), by imposing penalties (such as traffic fines), by borrowing, and also by confiscating wealth. From the view of economists, a tax is a non-penal, yet compulsory transfer of resources from the private to the public sector, levied on a basis of predetermined criteria and without reference to specific benefit received. 

In modern taxation systems, governments levy taxes in money; but in-kind and corvée taxation are characteristic of traditional or pre-capitalist states and their functional equivalents. The method of taxation and the government expenditure of taxes raised is often highly debated in politics and economics. Tax collection is performed by a government agency such as the Ghana Revenue Authority, Canada Revenue Agency, the Internal Revenue Service (IRS) in the United States, Her Majesty's Revenue and Customs (HMRC) in the United Kingdom or Federal Tax Service in Russia. When taxes are not fully paid, the state may impose civil penalties (such as fines or forfeiture) or criminal penalties (such as incarceration) on the non-paying entity or individual.

Purposes and effects

The levying of taxes aims to raise revenue to fund governing or to alter prices in order to affect demand. States and their functional equivalents throughout history have used money provided by taxation to carry out many functions. Some of these include expenditures on economic infrastructure (roads, public transportation, sanitation, legal systems, public safety, education, health-care systems), military, scientific research, culture and the arts, public works, distribution, data collection and dissemination, public insurance, and the operation of government itself. A government's ability to raise taxes is called its fiscal capacity. 

When expenditures exceed tax revenue, a government accumulates debt. A portion of taxes may be used to service past debts. Governments also use taxes to fund welfare and public services. These services can include education systems, pensions for the elderly, unemployment benefits, and public transportation. Energy, water and waste management systems are also common public utilities.

According to the proponents of the chartalist theory of money creation, taxes are not needed for government revenue, as long as the government in question is able to issue fiat money. According to this view, the purpose of taxation is to maintain the stability of the currency, express public policy regarding the distribution of wealth, subsidizing certain industries or population groups or isolating the costs of certain benefits, such as highways or social security.

Effects can be divided in two fundamental categories:

• Taxes cause an income effect because they reduce purchasing power to taxpayers.
• Taxes cause a substitution effect when taxation causes a substitution between taxed goods and untaxed goods.

Substitution effect and income effect with a taxation on y good.

 

If we consider, for instance, two normal goods, x and y, whose prices are respectively p_x and p_y and an individual budget constraint given by the equation xp_x + yp_y = Y, where Y is the income, the slope of the budget constraint, in a graph where is represented good x on the vertical axis and good y on the horizontal axes, is equal to -p_y/p_x . The initial equilibrium is in the point (C), in which budget constraint and indifference curve are tangent, introducing an ad valorem tax on the y good (budget constraint: p_xx + p_y(1 + τ)y = Y) , the budget constraint's slope becomes equal to -p_y(1 + τ)/p_x. The new equilibrium is now in the tangent point (A) with a lower indifferent curve.

As can be noticed the tax's introduction causes two consequences:

1. It changes the consumers' real income (less purchasing power)
2. It raises the relative price of y good.

The income effect shows the variation of y good quantity given by the change of real income. The substitution effect shows the variation of y good determined by relative prices' variation. This kind of taxation (that causes substitution effect) can be considered distortionary. 

Budget's constraint shift after an introduction of a lump sum tax or a general tax on consumption or a proportional income tax.

 

Another example can be the Introduction of an income lump-sum tax (xp_x + yp_y = Y - T), with a parallel shift downward of the budget constraint, can be produced a higher revenue with the same loss of consumers' utility compared with the property tax case, from another point of view, the same revenue can be produced with a lower utility sacrifice. The lower utility (with the same revenue) or the lower revenue (with the same utility) given by a distortionary tax are called excess pressure. The same result, reached with an income lump-sum tax, can be obtained with these following types of taxes (all of them cause only a budget constraint's shift without causing a substitution effect), the budget constraint's slope remains the same (-p_x/p_y):

• A general tax on consumption: (Budget constraint: p_x(1 + τ)x + p_y(1 + τ)y = Y)
• A proportional income tax: (Budget constraint: xp_x + yp_y = Y(1 - t))

When the t and τ rates are chosen respecting this equation (where t is the rate of income tax and tau is the consumption tax's rate): 

${\displaystyle {\frac {1}{1+\tau }}=1-t\Rightarrow t={\frac {\tau }{1+\tau }}}$

the effects of the two taxes are the same.

A tax effectively changes relative prices of products. Therefore, most economists, especially neoclassical economists, argue that taxation creates market distortion and results in economic inefficiency unless there are (positive or negative) externalities associated with the activities that are taxed that need to be internalized to reach an efficient market outcome. They have therefore sought to identify the kind of tax system that would minimize this distortion. Recent scholarship suggests that in the United States of America, the federal government effectively taxes investments in higher education more heavily than it subsidizes higher education, thereby contributing to a shortage of skilled workers and unusually high differences in pre-tax earnings between highly educated and less-educated workers.

Taxes can even have effects on labour supply: we can consider a model in which the consumer chooses the number of hours spent working and the amount spent on consumption. Let us suppose that only one good exists and no income is saved. 

Consumers have a given number of hours (H) that is divided between work (L) and free time (F = H - L). The hourly wage is called w and it tells us the free time's opportunity cost, i.e. the income to which the individual renounces consuming an additional hour of free time. Consumption and hours of work have a positive relationship, more hours of work mean more earnings and, assuming that workers don't save money, more earnings imply an increase in consumption (Y = C = wL). Free time and consumption can be considered as two normal goods (workers have to decide between working one hour more, that would mean consuming more, or having one more hour of free time) and the budget constraint is negative inclined (Y = w(H - F)). The indifference curve related to these two goods has a negative slope and free time becomes more and more important with high levels of consumption. It's because a high level of consumption means that people are already spending many hours working, so, in this situation, they need more free time than consume and it implies that they have to be paid with a higher salary to work an additional hour. A proportional income tax, changing budget constraint's slope (now Y = w(1 - t)(H - F)), implies both substitution and income effects. The problem now is that the two effects go in opposite ways: income effect tells us that, with an income tax, the consumer feels poorer and for this reason he wants to work more, causing an increase in labour offer. On the other hand, substitution effect tells us that free time, being a normal good, is now more convenient compared to consume and it implies a decrease in labour offer. Therefore, the total effect can be both an increase or a decrease of labour offer, depending on indifference curve's shape. 

The Laffer curve. In this case, the critical point is at a tax rate of 70%. Revenue increases until this peak, then it starts decreasing.

 

The Laffer curve depicts the amount of government revenue as a function of the rate of taxation. It shows that for a tax rate above a certain critical rate, government revenue starts decreasing as the tax rate rises, as a consequence of a decline in labour supply. This theory supports that, if the tax rate is above that critical point, a decrease in the tax rate should imply a rise in labour supply that in turn would lead to an increase in government revenue. 

Governments use different kinds of taxes and vary the tax rates. They do this in order to distribute the tax burden among individuals or classes of the population involved in taxable activities, such as the business sector, or to redistribute resources between individuals or classes in the population. Historically, taxes on the poor supported the nobility; modern social-security systems aim to support the poor, the disabled, or the retired by taxes on those who are still working. In addition, taxes are applied to fund foreign aid and military ventures, to influence the macroeconomic performance of the economy (a government's strategy for doing this is called its fiscal policy; see also tax exemption), or to modify patterns of consumption or employment within an economy, by making some classes of transaction more or less attractive. 

A state's tax system often reflects its communal values and the values of those in current political power. To create a system of taxation, a state must make choices regarding the distribution of the tax burden—who will pay taxes and how much they will pay—and how the taxes collected will be spent. In democratic nations where the public elects those in charge of establishing or administering the tax system, these choices reflect the type of community that the public wishes to create. In countries where the public does not have a significant amount of influence over the system of taxation, that system may reflect more closely the values of those in power. 

All large businesses incur administrative costs in the process of delivering revenue collected from customers to the suppliers of the goods or services being purchased. Taxation is no different; the resource collected from the public through taxation is always greater than the amount which can be used by the government. The difference is called the compliance cost and includes (for example) the labour cost and other expenses incurred in complying with tax laws and rules. The collection of a tax in order to spend it on a specified purpose, for example collecting a tax on alcohol to pay directly for alcoholism-rehabilitation centres, is called hypothecation. Finance ministers often dislike this practice, since it reduces their freedom of action. Some economic theorists regard hypothecation as intellectually dishonest since, in reality, money is fungible. Furthermore, it often happens that taxes or excises initially levied to fund some specific government programs are then later diverted to the government general fund. In some cases, such taxes are collected in fundamentally inefficient ways, for example, though highway tolls.

Since governments also resolve commercial disputes, especially in countries with common law, similar arguments are sometimes used to justify a sales tax or value added tax. Some (libertarians, for example) portray most or all forms of taxes as immoral due to their involuntary (and therefore eventually coercive or violent) nature. The most extreme anti-tax view, anarcho-capitalism, holds that all social services should be voluntarily bought by the people using them.

Types of taxes

The Organisation for Economic Co-operation and Development (OECD) publishes an analysis of the tax systems of member countries. As part of such analysis, OECD has developed a definition and system of classification of internal taxes, generally followed below. In addition, many countries impose taxes (tariffs) on the import of goods.

Income

Income tax

Many jurisdictions tax the income of individuals and business entities, including corporations. Generally, the authorities impose tax on net profits from a business, on net gains, and on other income. Computation of income subject to tax may be determined under accounting principles used in the jurisdiction, which may be modified or replaced by tax-law principles in the jurisdiction. The incidence of taxation varies by system, and some systems may be viewed as progressive or regressive. Rates of tax may vary or be constant (flat) by income level. Many systems allow individuals certain personal allowances and other non-business reductions to taxable income, although business deductions tend to be favored over personal deductions. 

Personal income tax is often collected on a pay-as-you-earn basis, with small corrections made soon after the end of the tax year. These corrections take one of two forms: payments to the government, for taxpayers who have not paid enough during the tax year; and tax refunds from the government to those who have overpaid. Income-tax systems will often have deductions available that reduces the total tax liability by reducing total taxable income. They may allow losses from one type of income to count against another. For example, a loss on the stock market may be deducted against taxes paid on wages. Other tax systems may isolate the loss, such that business losses can only be deducted against business tax by carrying forward the loss to later tax years.

Negative income

In economics, a negative income tax (abbreviated NIT) is a progressive income tax system where people earning below a certain amount receive supplemental payment from the government instead of paying taxes to the government.

Capital gains

Most jurisdictions imposing an income tax treat capital gains as part of income subject to tax. Capital gain is generally a gain on sale of capital assets—that is, those assets not held for sale in the ordinary course of business. Capital assets include personal assets in many jurisdictions. Some jurisdictions provide preferential rates of tax or only partial taxation for capital gains. Some jurisdictions impose different rates or levels of capital-gains taxation based on the length of time the asset was held. Because tax rates are often much lower for capital gains than for ordinary income, there is widespread controversy and dispute about the proper definition of capital.

Corporate

Corporate tax refers to income tax, capital tax, net-worth tax or other taxes imposed on corporations. Rates of tax and the taxable base for corporations may differ from those for individuals or for other taxable persons.

Social-security contributions

General government revenue, in % of GDP, from social contributions. For this data, the variance of GDP per capita with purchasing power parity (PPP) is explained in 20 % by social contributions revenue.

 

Many countries provide publicly funded retirement or health-care systems. In connection with these systems, the country typically requires employers and/or employees to make compulsory payments. These payments are often computed by reference to wages or earnings from self-employment. Tax rates are generally fixed, but a different rate may be imposed on employers than on employees. Some systems provide an upper limit on earnings subject to the tax. A few systems provide that the tax is payable only on wages above a particular amount. Such upper or lower limits may apply for retirement but not for health-care components of the tax. Some have argued that such taxes on wages are a form of "forced savings" and not really a tax, while others point to redistribution through such systems between generations (from newer cohorts to older cohorts) and across income levels (from higher income-levels to lower income-levels) which suggests that such programs are really tax and spending programs.

Payroll or workforce

Unemployment and similar taxes are often imposed on employers based on total payroll. These taxes may be imposed in both the country and sub-country levels.

Wealth

A wealth tax is a levy on the total value of personal assets, including: bank deposits, real estate, assets in insurance and pension plans, ownership of unincorporated businesses, financial securities, and personal trusts. Typically liabilities (primarily mortgages and other loans) are deducted, hence it is sometimes called a net wealth tax.

Property

Recurrent property taxes may be imposed on immovable property (real property) and on some classes of movable property. In addition, recurrent taxes may be imposed on the net wealth of individuals or corporations. Many jurisdictions impose estate tax, gift tax or other inheritance taxes on property at death or at the time of gift transfer. Some jurisdictions impose taxes on financial or capital transactions.

Property taxes

A property tax (or millage tax) is an ad valorem tax levy on the value of property that the owner of the property is required to pay to a government in which the property is situated. Multiple jurisdictions may tax the same property. There are three general varieties of property: land, improvements to land (immovable man-made things, e.g. buildings) and personal property (movable things). Real estate or realty is the combination of land and improvements to land. 

Property taxes are usually charged on a recurrent basis (e.g., yearly). A common type of property tax is an annual charge on the ownership of real estate, where the tax base is the estimated value of the property. For a period of over 150 years from 1695 the government of England levied a window tax, with the result that one can still see listed buildings with windows bricked up in order to save their owners money. A similar tax on hearths existed in France and elsewhere, with similar results. The two most common types of event-driven property taxes are stamp duty, charged upon change of ownership, and inheritance tax, which many countries impose on the estates of the deceased. 

In contrast with a tax on real estate (land and buildings), a land-value tax (or LVT) is levied only on the unimproved value of the land ("land" in this instance may mean either the economic term, i.e., all natural resources, or the natural resources associated with specific areas of the Earth's surface: "lots" or "land parcels"). Proponents of land-value tax argue that it is economically justified, as it will not deter production, distort market mechanisms or otherwise create deadweight losses the way other taxes do.

When real estate is held by a higher government unit or some other entity not subject to taxation by the local government, the taxing authority may receive a payment in lieu of taxes to compensate it for some or all of the foregone tax revenues.

In many jurisdictions (including many American states), there is a general tax levied periodically on residents who own personal property (personalty) within the jurisdiction. Vehicle and boat registration fees are subsets of this kind of tax. The tax is often designed with blanket coverage and large exceptions for things like food and clothing. Household goods are often exempt when kept or used within the household. Any otherwise non-exempt object can lose its exemption if regularly kept outside the household. Thus, tax collectors often monitor newspaper articles for stories about wealthy people who have lent art to museums for public display, because the artworks have then become subject to personal property tax. If an artwork had to be sent to another state for some touch-ups, it may have become subject to personal property tax in that state as well.

Inheritance

Inheritance tax, estate tax, and death tax or duty are the names given to various taxes which arise on the death of an individual. In United States tax law, there is a distinction between an estate tax and an inheritance tax: the former taxes the personal representatives of the deceased, while the latter taxes the beneficiaries of the estate. However, this distinction does not apply in other jurisdictions; for example, if using this terminology UK inheritance tax would be an estate tax.

Expatriation

An expatriation tax is a tax on individuals who renounce their citizenship or residence. The tax is often imposed based on a deemed disposition of all the individual's property. One example is the United States under the American Jobs Creation Act, where any individual who has a net worth of $2 million or an average income-tax liability of $127,000 who renounces his or her citizenship and leaves the country is automatically assumed to have done so for tax avoidance reasons and is subject to a higher tax rate.

Transfer

Historically, in many countries, a contract needs to have a stamp affixed to make it valid. The charge for the stamp is either a fixed amount or a percentage of the value of the transaction. In most countries, the stamp has been abolished but stamp duty remains. Stamp duty is levied in the UK on the purchase of shares and securities, the issue of bearer instruments, and certain partnership transactions. Its modern derivatives, stamp duty reserve tax and stamp duty land tax, are respectively charged on transactions involving securities and land. Stamp duty has the effect of discouraging speculative purchases of assets by decreasing liquidity. In the United States, transfer tax is often charged by the state or local government and (in the case of real property transfers) can be tied to the recording of the deed or other transfer documents.

Wealth (net worth)

Some countries' governments will require declaration of the tax payers' balance sheet (assets and liabilities), and from that exact a tax on net worth (assets minus liabilities), as a percentage of the net worth, or a percentage of the net worth exceeding a certain level. The tax may be levied on "natural" or "legal persons."

Goods and services

Value added

A value added tax (VAT), also known as Goods and Services Tax (G.S.T), Single Business Tax, or Turnover Tax in some countries, applies the equivalent of a sales tax to every operation that creates value. To give an example, sheet steel is imported by a machine manufacturer. That manufacturer will pay the VAT on the purchase price, remitting that amount to the government. The manufacturer will then transform the steel into a machine, selling the machine for a higher price to a wholesale distributor. The manufacturer will collect the VAT on the higher price, but will remit to the government only the excess related to the "value added" (the price over the cost of the sheet steel). The wholesale distributor will then continue the process, charging the retail distributor the VAT on the entire price to the retailer, but remitting only the amount related to the distribution mark-up to the government. The last VAT amount is paid by the eventual retail customer who cannot recover any of the previously paid VAT. For a VAT and sales tax of identical rates, the total tax paid is the same, but it is paid at differing points in the process. 

VAT is usually administrated by requiring the company to complete a VAT return, giving details of VAT it has been charged (referred to as input tax) and VAT it has charged to others (referred to as output tax). The difference between output tax and input tax is payable to the Local Tax Authority.

Many tax authorities have introduced automated VAT which has increased accountability and auditability, by utilizing computer-systems, thereby also enabling anti-cybercrime offices as well.

Sales

Sales taxes are levied when a commodity is sold to its final consumer. Retail organizations contend that such taxes discourage retail sales. The question of whether they are generally progressive or regressive is a subject of much current debate. People with higher incomes spend a lower proportion of them, so a flat-rate sales tax will tend to be regressive. It is therefore common to exempt food, utilities and other necessities from sales taxes, since poor people spend a higher proportion of their incomes on these commodities, so such exemptions make the tax more progressive. This is the classic "You pay for what you spend" tax, as only those who spend money on non-exempt (i.e. luxury) items pay the tax.

A small number of U.S. states rely entirely on sales taxes for state revenue, as those states do not levy a state income tax. Such states tend to have a moderate to large amount of tourism or inter-state travel that occurs within their borders, allowing the state to benefit from taxes from people the state would otherwise not tax. In this way, the state is able to reduce the tax burden on its citizens. The U.S. states that do not levy a state income tax are Alaska, Tennessee, Florida, Nevada, South Dakota, Texas, Washington state, and Wyoming. Additionally, New Hampshire and Tennessee levy state income taxes only on dividends and interest income. Of the above states, only Alaska and New Hampshire do not levy a state sales tax. Additional information can be obtained at the Federation of Tax Administrators website.

In the United States, there is a growing movement for the replacement of all federal payroll and income taxes (both corporate and personal) with a national retail sales tax and monthly tax rebate to households of citizens and legal resident aliens. The tax proposal is named FairTax. In Canada, the federal sales tax is called the Goods and Services tax (GST) and now stands at 5%. The provinces of British Columbia, Saskatchewan, Manitoba, and Prince Edward Island also have a provincial sales tax [PST]. The provinces of Nova Scotia, New Brunswick, Newfoundland & Labrador, and Ontario have harmonized their provincial sales taxes with the GST—Harmonized Sales Tax [HST], and thus is a full VAT. The province of Quebec collects the Quebec Sales Tax [QST] which is based on the GST with certain differences. Most businesses can claim back the GST, HST and QST they pay, and so effectively it is the final consumer who pays the tax.

Excises

An excise duty is an indirect tax imposed upon goods during the process of their manufacture, production or distribution, and is usually proportionate to their quantity or value. Excise duties were first introduced into England in the year 1643, as part of a scheme of revenue and taxation devised by parliamentarian John Pym and approved by the Long Parliament. These duties consisted of charges on beer, ale, cider, cherry wine and tobacco, to which list were afterwards added paper, soap, candles, malt, hops, and sweets. The basic principle of excise duties was that they were taxes on the production, manufacture or distribution of articles which could not be taxed through the customs house, and revenue derived from that source is called excise revenue proper. The fundamental conception of the term is that of a tax on articles produced or manufactured in a country. In the taxation of such articles of luxury as spirits, beer, tobacco, and cigars, it has been the practice to place a certain duty on the importation of these articles (a customs duty).

Excises (or exemptions from them) are also used to modify consumption patterns of a certain area (social engineering). For example, a high excise is used to discourage alcohol consumption, relative to other goods. This may be combined with hypothecation if the proceeds are then used to pay for the costs of treating illness caused by alcohol abuse. Similar taxes may exist on tobacco, pornography, etc., and they may be collectively referred to as "sin taxes". A carbon tax is a tax on the consumption of carbon-based non-renewable fuels, such as petrol, diesel-fuel, jet fuels, and natural gas. The object is to reduce the release of carbon into the atmosphere. In the United Kingdom, vehicle excise duty is an annual tax on vehicle ownership.

Tariff

An import or export tariff (also called customs duty or impost) is a charge for the movement of goods through a political border. Tariffs discourage trade, and they may be used by governments to protect domestic industries. A proportion of tariff revenues is often hypothecated to pay government to maintain a navy or border police. The classic ways of cheating a tariff are smuggling or declaring a false value of goods. Tax, tariff and trade rules in modern times are usually set together because of their common impact on industrial policy, investment policy, and agricultural policy. A trade bloc is a group of allied countries agreeing to minimize or eliminate tariffs against trade with each other, and possibly to impose protective tariffs on imports from outside the bloc. A customs union has a common external tariff, and the participating countries share the revenues from tariffs on goods entering the customs union. 

In some societies, tariffs also could be imposed by local authorities on the movement of goods between regions (or via specific internal gateways). A notable example is the likin, which became an important revenue source for local governments in the late Qing China.

Other

License fees

Occupational taxes or license fees may be imposed on businesses or individuals engaged in certain businesses. Many jurisdictions impose a tax on vehicles.

Poll

A poll tax, also called a per capita tax, or capitation tax, is a tax that levies a set amount per individual. It is an example of the concept of fixed tax. One of the earliest taxes mentioned in the Bible of a half-shekel per annum from each adult Jew (Ex. 30:11–16) was a form of poll tax. Poll taxes are administratively cheap because they are easy to compute and collect and difficult to cheat. Economists have considered poll taxes economically efficient because people are presumed to be in fixed supply and poll taxes therefore do not lead to economic distortions. However, poll taxes are very unpopular because poorer people pay a higher proportion of their income than richer people. In addition, the supply of people is in fact not fixed over time: on average, couples will choose to have fewer children if a poll tax is imposed. The introduction of a poll tax in medieval England was the primary cause of the 1381 Peasants' Revolt. Scotland was the first to be used to test the new poll tax in 1989 with England and Wales in 1990. The change from a progressive local taxation based on property values to a single-rate form of taxation regardless of ability to pay (the Community Charge, but more popularly referred to as the Poll Tax), led to widespread refusal to pay and to incidents of civil unrest, known colloquially as the 'Poll Tax Riots'.

Other

Some types of taxes have been proposed but not actually adopted in any major jurisdiction. These include:

• Bank tax
• Financial transaction taxes including currency transaction taxes

Descriptive labels

Ad valorem and per unit

An ad valorem tax is one where the tax base is the value of a good, service, or property. Sales taxes, tariffs, property taxes, inheritance taxes, and value added taxes are different types of ad valorem tax. An ad valorem tax is typically imposed at the time of a transaction (sales tax or value added tax (VAT)) but it may be imposed on an annual basis (property tax) or in connection with another significant event (inheritance tax or tariffs). 

In contrast to ad valorem taxation is a per unit tax, where the tax base is the quantity of something, regardless of its price. An excise tax is an example.

Consumption

Consumption tax refers to any tax on non-investment spending, and can be implemented by means of a sales tax, consumer value added tax, or by modifying an income tax to allow for unlimited deductions for investment or savings.

Environmental

This includes natural resources consumption tax, greenhouse gas tax (Carbon tax), "sulfuric tax", and others. The stated purpose is to reduce the environmental impact by repricing. Economists describe environmental impacts as negative externalities. As early as 1920, Arthur Pigou suggested a tax to deal with externalities (see also the section on Increased economic welfare below). The proper implementation of environmental taxes has been the subject of a long lasting debate.

Proportional, progressive, regressive, and lump-sum

An important feature of tax systems is the percentage of the tax burden as it relates to income or consumption. The terms progressive, regressive, and proportional are used to describe the way the rate progresses from low to high, from high to low, or proportionally. The terms describe a distribution effect, which can be applied to any type of tax system (income or consumption) that meets the definition.

• A progressive tax is a tax imposed so that the effective tax rate increases as the amount to which the rate is applied increases.
• The opposite of a progressive tax is a regressive tax, where the effective tax rate decreases as the amount to which the rate is applied increases. This effect is commonly produced where means testing is used to withdraw tax allowances or state benefits.
• In between is a proportional tax, where the effective tax rate is fixed, while the amount to which the rate is applied increases.
• A lump-sum tax is a tax that is a fixed amount, no matter the change in circumstance of the taxed entity. This in actuality is a regressive tax as those with lower income must use higher percentage of their income than those with higher income and therefore the effect of the tax reduces as a function of income.

The terms can also be used to apply meaning to the taxation of select consumption, such as a tax on luxury goods and the exemption of basic necessities may be described as having progressive effects as it increases a tax burden on high end consumption and decreases a tax burden on low end consumption.

Direct and indirect

Taxes are sometimes referred to as "direct taxes" or "indirect taxes". The meaning of these terms can vary in different contexts, which can sometimes lead to confusion. An economic definition, by Atkinson, states that "...direct taxes may be adjusted to the individual characteristics of the taxpayer, whereas indirect taxes are levied on transactions irrespective of the circumstances of buyer or seller." According to this definition, for example, income tax is "direct", and sales tax is "indirect". 

In law, the terms may have different meanings. In U.S. constitutional law, for instance, direct taxes refer to poll taxes and property taxes, which are based on simple existence or ownership. Indirect taxes are imposed on events, rights, privileges, and activities. Thus, a tax on the sale of property would be considered an indirect tax, whereas the tax on simply owning the property itself would be a direct tax.

Fees and effective

Governments may charge user fees, tolls, or other types of assessments in exchange of particular goods, services, or use of property. These are generally not considered taxes, as long as they are levied as payment for a direct benefit to the individual paying. Such fees include:

• Tolls: a fee charged to travel via a road, bridge, tunnel, canal, waterway or other transportation facilities. Historically tolls have been used to pay for public bridge, road and tunnel projects. They have also been used in privately constructed transport links. The toll is likely to be a fixed charge, possibly graduated for vehicle type, or for distance on long routes.
• User fees, such as those charged for use of parks or other government owned facilities.
• Ruling fees charged by governmental agencies to make determinations in particular situations.

Some scholars refer to certain economic effects as taxes, though they are not levies imposed by governments. These include:

• Inflation tax: the economic disadvantage suffered by holders of cash and cash equivalents in one denomination of currency due to the effects of expansionary monetary policy
• Financial repression: Government policies such as interest-rate caps on government debt, financial regulations such as reserve requirements and capital controls, and barriers to entry in markets where the government owns or controls businesses.

History

Egyptian peasants seized for non-payment of taxes. (Pyramid Age)

The first known system of taxation was in Ancient Egypt around 3000–2800 BC in the First Dynasty of Egypt of the Old Kingdom of Egypt. The earliest and most widespread form of taxation was the corvée and tithe. The corvée was forced labour provided to the state by peasants too poor to pay other forms of taxation (labour in ancient Egyptian is a synonym for taxes). Records from the time document that the Pharaoh would conduct a biennial tour of the kingdom, collecting tithes from the people. Other records are granary receipts on limestone flakes and papyrus. Early taxation is also described in the Bible. In Genesis (chapter 47, verse 24 – the New International Version), it states "But when the crop comes in, give a fifth of it to Pharaoh. The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children". Joseph was telling the people of Egypt how to divide their crop, providing a portion to the Pharaoh. A share (20%) of the crop was the tax (in this case, a special rather than an ordinary tax, as it was gathered against an expected famine) The stock made by was returned and equally shared with the people of Egypt and traded with the surrounding nations thus saving and elevating Egypt.

In the Persian Empire, a regulated and sustainable tax system was introduced by Darius I the Great in 500 BC; the Persian system of taxation was tailored to each Satrapy (the area ruled by a Satrap or provincial governor). At differing times, there were between 20 and 30 Satrapies in the Empire and each was assessed according to its supposed productivity. It was the responsibility of the Satrap to collect the due amount and to send it to the treasury, after deducting his expenses (the expenses and the power of deciding precisely how and from whom to raise the money in the province, offer maximum opportunity for rich pickings). The quantities demanded from the various provinces gave a vivid picture of their economic potential. For instance, Babylon was assessed for the highest amount and for a startling mixture of commodities; 1,000 silver talents and four months supply of food for the army. India, a province fabled for its gold, was to supply gold dust equal in value to the very large amount of 4,680 silver talents. Egypt was known for the wealth of its crops; it was to be the granary of the Persian Empire (and, later, of the Roman Empire) and was required to provide 120,000 measures of grain in addition to 700 talents of silver. This tax was exclusively levied on Satrapies based on their lands, productive capacity and tribute levels.

The Rosetta Stone, a tax concession issued by Ptolemy V in 196 BC and written in three languages "led to the most famous decipherment in history—the cracking of hieroglyphics".

Islamic rulers imposed Zakat (a tax on Muslims) and Jizya (a poll tax on conquered non-Muslims). In India this practice began in the 11th century.

Trends

Numerous records of government tax collection in Europe since at least the 17th century are still available today. But taxation levels are hard to compare to the size and flow of the economy since production numbers are not as readily available. Government expenditures and revenue in France during the 17th century went from about 24.30 million livres in 1600–10 to about 126.86 million livres in 1650–59 to about 117.99 million livres in 1700–10 when government debt had reached 1.6 billion livres. In 1780–89, it reached 421.50 million livres. Taxation as a percentage of production of final goods may have reached 15–20% during the 17th century in places such as France, the Netherlands, and Scandinavia. During the war-filled years of the eighteenth and early nineteenth century, tax rates in Europe increased dramatically as war became more expensive and governments became more centralized and adept at gathering taxes. This increase was greatest in England, Peter Mathias and Patrick O'Brien found that the tax burden increased by 85% over this period. Another study confirmed this number, finding that per capita tax revenues had grown almost sixfold over the eighteenth century, but that steady economic growth had made the real burden on each individual only double over this period before the industrial revolution. Effective tax rates were higher in Britain than France the years before the French Revolution, twice in per capita income comparison, but they were mostly placed on international trade. In France, taxes were lower but the burden was mainly on landowners, individuals, and internal trade and thus created far more resentment.

Taxation as a percentage of GDP 2016 was 45.9% in Denmark, 45.3% in France, 33.2% in the United Kingdom, 26% in the United States, and among all OECD members an average of 34.3%.

Forms

In monetary economies prior to fiat banking, a critical form of taxation was seigniorage, the tax on the creation of money. 

Other obsolete forms of taxation include:

• Scutage, which is paid in lieu of military service; strictly speaking, it is a commutation of a non-tax obligation rather than a tax as such but functioning as a tax in practice.
• Tallage, a tax on feudal dependents.
• Tithe, a tax-like payment (one tenth of one's earnings or agricultural produce), paid to the Church (and thus too specific to be a tax in strict technical terms). This should not be confused with the modern practice of the same name which is normally voluntary.
• (Feudal) aids, a type of tax or due that was paid by a vassal to his lord during feudal times.
• Danegeld, a medieval land tax originally raised to pay off raiding Danes and later used to fund military expenditures.
• Carucage, a tax which replaced the danegeld in England.
• Tax farming, the principle of assigning the responsibility for tax revenue collection to private citizens or groups.
• Socage, a feudal tax system based on land rent.
• Burgage, a feudal tax system based on land rent.

Some principalities taxed windows, doors, or cabinets to reduce consumption of imported glass and hardware. Armoires, hutches, and wardrobes were employed to evade taxes on doors and cabinets. In some circumstances, taxes are also used to enforce public policy like congestion charge (to cut road traffic and encourage public transport) in London. In Tsarist Russia, taxes were clamped on beards. Today, one of the most-complicated taxation systems worldwide is in Germany. Three quarters of the world's taxation literature refers to the German system. Under the German system, there are 118 laws, 185 forms, and 96,000 regulations, spending €3.7 billion to collect the income tax. In the United States, the IRS has about 1,177 forms and instructions, 28.4111 megabytes of Internal Revenue Code which contained 3.8 million words as of 1 February 2010, numerous tax regulations in the Code of Federal Regulations, and supplementary material in the Internal Revenue Bulletin. Today, governments in more advanced economies (i.e. Europe and North America) tend to rely more on direct taxes, while developing economies (i.e. India and several African countries) rely more on indirect taxes.

Economic effects

Public finance revenue from taxes in % of GDP. For this data, the variance of GDP per capita with purchasing power parity (PPP) is explained in 32 % by tax revenue.

 

In economic terms, taxation transfers wealth from households or businesses to the government of a nation. Adam Smith writes in The Wealth of Nations that

"…the economic incomes of private people are of three main types: rent, profit and wages. Ordinary taxpayers will ultimately pay their taxes from at least one of these revenue sources. The government may intend that a particular tax should fall exclusively on rent, profit, or wages – and that another tax should fall on all three private income sources jointly. However, many taxes will inevitably fall on resources and persons very different from those intended … Good taxes meet four major criteria. They are (1) proportionate to incomes or abilities to pay (2) certain rather than arbitrary (3) payable at times and in ways convenient to the taxpayers and (4) cheap to administer and collect."

The side-effects of taxation (such as economic distortions) and theories about how best to tax are an important subject in microeconomics. Taxation is almost never a simple transfer of wealth. Economic theories of taxation approach the question of how to maximize economic welfare through taxation. 

A 2019 study looking at the impact of tax cuts for different income groups, it was tax cuts for low-income groups that had the greatest positive impact on employment growth. Tax cuts for the wealthiest top 10% had a small impact.

Incidence

Law establishes from whom a tax is collected. In many countries, taxes are imposed on business (such as corporate taxes or portions of payroll taxes). However, who ultimately pays the tax (the tax "burden") is determined by the marketplace as taxes become embedded into production costs. Economic theory suggests that the economic effect of tax does not necessarily fall at the point where it is legally levied. For instance, a tax on employment paid by employers will impact on the employee, at least in the long run. The greatest share of the tax burden tends to fall on the most inelastic factor involved—the part of the transaction which is affected least by a change in price. So, for instance, a tax on wages in a town will (at least in the long run) affect property-owners in that area. 

Depending on how quantities supplied and demanded vary with price (the "elasticities" of supply and demand), a tax can be absorbed by the seller (in the form of lower pre-tax prices), or by the buyer (in the form of higher post-tax prices). If the elasticity of supply is low, more of the tax will be paid by the supplier. If the elasticity of demand is low, more will be paid by the customer; and, contrariwise for the cases where those elasticities are high. If the seller is a competitive firm, the tax burden is distributed over the factors of production depending on the elasticities thereof; this includes workers (in the form of lower wages), capital investors (in the form of loss to shareholders), landowners (in the form of lower rents), entrepreneurs (in the form of lower wages of superintendence) and customers (in the form of higher prices).

To show this relationship, suppose that the market price of a product is $1.00, and that a $0.50 tax is imposed on the product that, by law, is to be collected from the seller. If the product has an elastic demand, a greater portion of the tax will be absorbed by the seller. This is because goods with elastic demand cause a large decline in quantity demanded for a small increase in price. Therefore, in order to stabilize sales, the seller absorbs more of the additional tax burden. For example, the seller might drop the price of the product to $0.70 so that, after adding in the tax, the buyer pays a total of $1.20, or $0.20 more than he did before the $0.50 tax was imposed. In this example, the buyer has paid $0.20 of the $0.50 tax (in the form of a post-tax price) and the seller has paid the remaining $0.30 (in the form of a lower pre-tax price).

Increased economic welfare

Government spending

The purpose of taxation is to provide for government spending without inflation. The provision of public goods such as roads and other infrastructure, schools, a social safety net, health care, national defense, law enforcement, and a courts system increases the economic welfare of society if the benefit outweighs the costs involved.

Pigovian

The existence of a tax can increase economic efficiency in some cases. If there is a negative externality associated with a good, meaning that it has negative effects not felt by the consumer, then a free market will trade too much of that good. By taxing the good, the government can increase overall welfare as well as raising revenue. This type of tax is called a Pigovian tax, after economist Arthur Pigou.

Possible Pigovian taxes include those on polluting fuels (like petrol), taxes on goods which incur public healthcare costs (such as alcohol or tobacco), and charges for existing 'free' public goods (like congestion charging) are another possibility.

Reduced inequality

Progressive taxation may reduce economic inequality. This effect occurs even when the tax revenue isn't redistributed.

Reduced economic welfare

Most taxes (see below) have side effects that reduce economic welfare, either by mandating unproductive labor (compliance costs) or by creating distortions to economic incentives (deadweight loss and perverse incentives).

Cost of compliance

Although governments must spend money on tax collection activities, some of the costs, particularly for keeping records and filling out forms, are borne by businesses and by private individuals. These are collectively called costs of compliance. More complex tax systems tend to have higher compliance costs. This fact can be used as the basis for practical or moral arguments in favor of tax simplification (such as the FairTax or OneTax, and some flat tax proposals).

Deadweight costs

Diagram illustrating deadweight costs of taxes

 

In the absence of negative externalities, the introduction of taxes into a market reduces economic efficiency by causing deadweight loss. In a competitive market the price of a particular economic good adjusts to ensure that all trades which benefit both the buyer and the seller of a good occur. The introduction of a tax causes the price received by the seller to be less than the cost to the buyer by the amount of the tax. This causes fewer transactions to occur, which reduces economic welfare; the individuals or businesses involved are less well off than before the tax. The tax burden and the amount of deadweight cost is dependent on the elasticity of supply and demand for the good taxed. 

Most taxes—including income tax and sales tax—can have significant deadweight costs. The only way to avoid deadweight costs in an economy that is generally competitive is to refrain from taxes that change economic incentives. Such taxes include the land value tax, where the tax is on a good in completely inelastic supply, a lump sum tax such as a poll tax (head tax) which is paid by all adults regardless of their choices. Arguably a windfall profits tax which is entirely unanticipated can also fall into this category.

Deadweight loss does not account for the effect taxes have in leveling the business playing field. Businesses that have more money are better suited to fend off competition. It is common that an industry with a small amount of very large corporations has a very high barrier of entry for new entrants coming into the marketplace. This is due to the fact that the larger the corporation, the better its position to negotiate with suppliers. Also, larger companies may be able to operate at low or even negative profits for extended periods of time, thus pushing out competition. More progressive taxation of profits, however, would reduce such barriers for new entrants, thereby increasing competition and ultimately benefiting consumers.

Perverse incentives

Complexity of the tax code in developed economies offer perverse tax incentives. The more details of tax policy there are, the more opportunities for legal tax avoidance and illegal tax evasion. These not only result in lost revenue, but involve additional costs: for instance, payments made for tax advice are essentially deadweight costs because they add no wealth to the economy. Perverse incentives also occur because of non-taxable 'hidden' transactions; for instance, a sale from one company to another might be liable for sales tax, but if the same goods were shipped from one branch of a corporation to another, no tax would be payable.

To address these issues, economists often suggest simple and transparent tax structures which avoid providing loopholes. Sales tax, for instance, can be replaced with a value added tax which disregards intermediate transactions.

In developing countries

Following Nicolas Kaldor's research, public finance in developing countries is strongly tied to state capacity and financial development. As state capacity develops, states not only increase the level of taxation but also the pattern of taxation. With the increase of larger tax bases and the diminish of the importance of trading tax, while income tax gains more importance. According to Tilly's argument, state capacity evolves as response to the emergence of war. War is an incentive for states to raise tax and strengthen states capacity. Historically, many taxation breakthroughs took place during the wartime. The introduction of income tax in Britain was due to the Napoleonic War in 1798. US first introduce income tax during Civil War. Taxation is constrained by the fiscal and legal capacities of a country. Fiscal and legal capacities also complement each other. A well-designed tax system can minimize efficiency loss and boost economic growth. With better compliance and better support to financial institutions and individual property, the government will be able to collect more tax. Although wealthier countries have higher tax revenue, economic growth does not always translate to higher tax revenue. For example, in India, increases in exemptions leads to the stagnation of income tax revenue at around 0.5% of GDP since 1986.

Researchers for EPS PEAKS stated that the core purpose of taxation is revenue mobilisation, providing resources for National Budgets, and forming an important part of macroeconomic management. They said economic theory has focused on the need to 'optimise' the system through balancing efficiency and equity, understanding the impacts on production, and consumption as well as distribution, redistribution, and welfare. 

They state that taxes and tax reliefs have also been used as a tool for behavioural change, to influence investment decisions, labour supply, consumption patterns, and positive and negative economic spill-overs (externalities), and ultimately, the promotion of economic growth and development. The tax system and its administration also play an important role in state-building and governance, as a principal form of 'social contract' between the state and citizens who can, as taxpayers, exert accountability on the state as a consequence. 

The researchers wrote that domestic revenue forms an important part of a developing country's public financing as it is more stable and predictable than Overseas Development Assistance and necessary for a country to be self-sufficient. They found that domestic revenue flows are, on average, already much larger than ODA, with aid worth less than 10% of collected taxes in Africa as a whole.

However, in a quarter of African countries Overseas Development Assistance does exceed tax collection, with these more likely to be non-resource-rich countries. This suggests countries making most progress replacing aid with tax revenue tend to be those benefiting disproportionately from rising prices of energy and commodities.

The author  found tax revenue as a percentage of GDP varying greatly around a global average of 19%. This data also indicates countries with higher GDP tend to have higher tax to GDP ratios, demonstrating that higher income is associated with more than proportionately higher tax revenue. On average, high-income countries have tax revenue as a percentage of GDP of around 22%, compared to 18% in middle-income countries and 14% in low-income countries.

In high-income countries, the highest tax-to-GDP ratio is in Denmark at 47% and the lowest is in Kuwait at 0.8%, reflecting low taxes from strong oil revenues. Long-term average performance of tax revenue as a share of GDP in low-income countries has been largely stagnant, although most have shown some improvement in more recent years. On average, resource-rich countries have made the most progress, rising from 10% in the mid-1990s to around 17% in 2008. Non resource rich countries made some progress, with average tax revenues increasing from 10% to 15% over the same period.

Many low-income countries have a tax-to-GDP ratio of less than 15% which could be due to low tax potential, such as a limited taxable economic activity, or low tax effort due to policy choice, non-compliance, or administrative constraints.

Some low-income countries have relatively high tax-to- GDP ratios due to resource tax revenues (e.g. Angola) or relatively efficient tax administration (e.g. Kenya, Brazil) whereas some middle-income countries have lower tax-to-GDP ratios (e.g. Malaysia) which reflect a more tax-friendly policy choice. 

While overall tax revenues have remained broadly constant, the global trend shows trade taxes have been declining as a proportion of total revenues(IMF, 2011), with the share of revenue shifting away from border trade taxes towards domestically levied sales taxes on goods and services. Low-income countries tend to have a higher dependence on trade taxes, and a smaller proportion of income and consumption taxes, when compared to high income countries.

One indicator of the taxpaying experience was captured in the 'Doing Business' survey, which compares the total tax rate, time spent complying with tax procedures and the number of payments required through the year, across 176 countries. The 'easiest' countries in which to pay taxes are located in the Middle East with the UAE ranking first, followed by Qatar and Saudi Arabia, most likely reflecting low tax regimes in those countries. Countries in Sub-Saharan Africa are among the 'hardest' to pay with the Central African Republic, Republic of Congo, Guinea and Chad in the bottom 5, reflecting higher total tax rates and a greater administrative burden to comply.

Key facts

The below facts were compiled by EPS PEAKS researchers:

• Trade liberalisation has led to a decline in trade taxes as a share of total revenues and GDP.
• Resource-rich countries tend to collect more revenue as a share of GDP, but this is more volatile. Sub-Saharan African countries that are resource rich have performed better tax collecting than non-resource-rich countries, but revenues are more volatile from year to year. By strengthening revenue management, there are huge opportunities for investment for development and growth.
• Developing countries have an informal sector representing an average of around 40%, perhaps up to 60% in some. Informal sectors feature many small informal traders who may not be efficient in bringing into the tax net, since the cost of collection is high and revenue potential limited (although there are broader governance benefits). There is also an issue of non-compliant companies who are 'hard to tax', evading taxes and should be brought into the tax net.
• In many low-income countries, the majority of revenue is collected from a narrow tax base, sometimes because of a limited range of taxable economic activities. There is therefore dependence on few taxpayers, often multinationals, that can exacerbate the revenue challenge by minimising their tax liability, in some cases abusing a lack of capacity in revenue authorities, sometimes through transfer pricing abuse.
• Developing and developed countries face huge challenges in taxing multinationals and international citizens. Estimates of tax revenue losses from evasion and avoidance in developing countries are limited by a lack of data and methodological shortcomings, but some estimates are significant.
• Countries use incentives to attract investment but doing this may be unnecessarily giving up revenue as evidence suggests that investors are influenced more by economic fundamentals like market size, infrastructure, and skills, and only marginally by tax incentives (IFC investor surveys). For example, even though the Armenian government supports the IT sector and improves the investment climate, the small size of the domestic market, low wages, low demand for productivity enhancement tools, financial constraints, high software piracy rates, and other factors make growth in this sector a slow process. Meaning that tax incentives do not contribute to the development of the sector as much as it is thought to contribute.
• In low-income countries, compliance costs are high, they are lengthy processes, frequent tax payments, bribes and corruption.
• Administrations are often under-resourced, resources aren't effectively targeted on areas of greatest impact, and mid-level management is weak. Coordination between domestic and customs is weak, which is especially important for VAT. Weak administration, governance and corruption tend to be associated with low revenue collections (IMF, 2011).
• Evidence on the effect of aid on tax revenues is inconclusive. Tax revenue is more stable and sustainable than aid. While a disincentive effect of aid on revenue may be expected and was supported by some early studies, recent evidence does not support that conclusion, and in some cases, points towards higher tax revenue following support for revenue mobilisation.
• Of all regions, Africa has the highest total tax rates borne by business at 57.4% of profit on average, but has reduced the most since 2004, from 70%, partly due to introducing VAT and this is likely to have a beneficial effect on attracting investment.
• Fragile states are less able to expand tax revenue as a percentage of GDP and any gains are more difficult to sustain. Tax administration tends to collapse if conflict reduces state controlled territory or reduces productivity. As economies are rebuilt after conflicts, there can be good progress in developing effective tax systems. Liberia expanded from 10.6% of GDP in 2003 to 21.3% in 2011. Mozambique increased from 10.5% of GDP in 1994 to around 17.7% in 2011.

Summary

Aid interventions in revenue can support revenue mobilisation for growth, improve tax system design and administrative effectiveness, and strengthen governance and compliance. The author of the Economics Topic Guide found that the best aid modalities for revenue depend on country circumstances, but should aim to align with government interests and facilitate effective planning and implementation of activities under an evidence-based tax reform. Lastly, she found that identifying areas for further reform requires country-specific diagnostic assessment: broad areas for developing countries identified internationally (e.g. IMF) include, for example property taxation for local revenues, strengthening expenditure management, and effective taxation of extractive industries and multinationals.

Views

Support

Every tax, however, is, to the person who pays it, a badge, not of slavery, but of liberty. – Adam Smith (1776), Wealth of Nations

 

According to most political philosophies, taxes are justified as they fund activities that are necessary and beneficial to society. Additionally, progressive taxation can be used to reduce economic inequality in a society. According to this view, taxation in modern nation-states benefit the majority of the population and social development. A common presentation of this view, paraphrasing various statements by Oliver Wendell Holmes, Jr. is "Taxes are the price of civilization".

It can also be argued that in a democracy, because the government is the party performing the act of imposing taxes, society as a whole decides how the tax system should be organized. The American Revolution's "No taxation without representation" slogan implied this view. For traditional conservatives, the payment of taxation is justified as part of the general obligations of citizens to obey the law and support established institutions. The conservative position is encapsulated in perhaps the most famous adage of public finance, "An old tax is a good tax". Conservatives advocate the "fundamental conservative premise that no one should be excused from paying for government, lest they come to believe that government is costless to them with the certain consequence that they will demand more government 'services'." Social democrats generally favor higher levels of taxation to fund public provision of a wide range of services such as universal health care and education, as well as the provision of a range of welfare benefits. As argued by Tony Crosland and others, the capacity to tax income from capital is a central element of the social democratic case for a mixed economy as against Marxist arguments for comprehensive public ownership of capital. Many libertarians recommend a minimal level of taxation in order to maximize the protection of liberty.

Compulsory taxation of individuals, such as income tax, is often justified on grounds including territorial sovereignty, and the social contract. Defenders of business taxation argue that it is an efficient method of taxing income that ultimately flows to individuals, or that separate taxation of business is justified on the grounds that commercial activity necessarily involves use of publicly established and maintained economic infrastructure, and that businesses are in effect charged for this use. Georgist economists argue that all of the economic rent collected from natural resources (land, mineral extraction, fishing quotas, etc.) is unearned income, and belongs to the community rather than any individual. They advocate a high tax (the "Single Tax") on land and other natural resources to return this unearned income to the state, but no other taxes.

Opposition

Because payment of tax is compulsory and enforced by the legal system, rather than voluntary like crowdfunding, some political philosophies view taxation as theft, extortion, (or as slavery, or as a violation of property rights), or tyranny, accusing the government of levying taxes via force and coercive means. Voluntaryists, individualist anarchists, Objectivists, anarcho-capitalists, and libertarians see taxation as government aggression. The view that democracy legitimizes taxation is rejected by those who argue that all forms of government, including laws chosen by democratic means, are fundamentally oppressive. According to Ludwig von Mises, "society as a whole" should not make such decisions, due to methodological individualism. Libertarian opponents of taxation claim that governmental protection, such as police and defense forces might be replaced by market alternatives such as private defense agencies, arbitration agencies or voluntary contributions.

Socialist view

Karl Marx assumed that taxation would be unnecessary after the advent of communism and looked forward to the "withering away of the state". In socialist economies such as that of China, taxation played a minor role, since most government income was derived from the ownership of enterprises, and it was argued by some that monetary taxation was not necessary. While the morality of taxation is sometimes questioned, most arguments about taxation revolve around the degree and method of taxation and associated government spending, not taxation itself.

Choice

Tax choice is the theory that taxpayers should have more control with how their individual taxes are allocated. If taxpayers could choose which government organizations received their taxes, opportunity cost decisions would integrate their partial knowledge. For example, a taxpayer who allocated more of his taxes on public education would have less to allocate on public healthcare. Supporters argue that allowing taxpayers to demonstrate their preferences would help ensure that the government succeeds at efficiently producing the public goods that taxpayers truly value. This would end real estate speculation, business cycles, unemployment and distribute wealth much more evenly. Joseph Stiglitz's Henry George Theorem predicts its sufficiency because—as George also noted—public spending raises land value.

Geoist View

Geoists (Georgists and geolibertarians) state that taxation should primarily collect economic rent, in particular the value of land, for both reasons of economic efficiency as well as morality. The efficiency of using economic rent for taxation is (as economists agree) due to the fact that such taxation cannot be passed on and does not create any dead-weight loss, and that it removes the incentive to speculate on land. Its morality is based on the Geoist premise that private property is justified for products of labour but not for land and natural resources.

Economist and social reformer Henry George opposed sales taxes and protective tariffs for their negative impact on trade. He also believed in the right of each person to the fruits of their own labour and productive investment. Therefore, income from labour and proper capital should remain untaxed. For this reason many Geoists—in particular those that call themselves geolibertarian—share the view with libertarians that these types of taxation (but not all) are immoral and even theft. George stated there should be one single tax: the Land Value Tax, which is considered both efficient and moral. Demand for specific land is dependent on nature, but even more so on the presence of communities, trade, and government infrastructure, particularly in urban environments. Therefore, the economic rent of land is not the product of one particular individual and it may be claimed for public expenses. According to George, this would end real estate bubbles, business cycles, unemployment and distribute wealth much more evenly. Joseph Stiglitz's Henry George Theorem predicts its sufficiency for financing public goods because those raise land value.

John Locke stated that whenever labour is mixed with natural resources, such as is the case with improved land, private property is justified under the proviso that there must be enough other natural resources of the same quality available to others. Geoists state that the Lockean proviso is violated wherever land value is greater than zero. Therefore, under the assumed principle of equal rights of all people to natural resources, the occupier of any such land must compensate the rest of society to the amount of that value. For this reason, geoists generally believe that such payment cannot be regarded as a true 'tax', but rather a compensation or fee. This means that while Geoists also regard taxation as an instrument of social justice, contrary to social democrats and social liberals they do not regard it as an instrument of redistribution but rather a 'predistribution' or simply a correct distribution of the commons.

Modern geoists note that land in the classical economic meaning of the word referred to all natural resources, and thus also includes resources such as mineral deposits, water bodies and the electromagnetic spectrum, to which privileged access also generates economic rent that must be compensated. Under the same reasoning most of them also consider pigouvian taxes as compensation for environmental damage or privilege as acceptable and even necessary.

Theories

Laffer curve

In economics, the Laffer curve is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. It is used to illustrate the concept of taxable income elasticity (that taxable income will change in response to changes in the rate of taxation). The curve is constructed by thought experiment. First, the amount of tax revenue raised at the extreme tax rates of 0% and 100% is considered. It is clear that a 0% tax rate raises no revenue, but the Laffer curve hypothesis is that a 100% tax rate will also generate no revenue because at such a rate there is no longer any incentive for a rational taxpayer to earn any income, thus the revenue raised will be 100% of nothing. If both a 0% rate and 100% rate of taxation generate no revenue, it follows from the extreme value theorem that there must exist at least one rate in between where tax revenue would be a maximum. The Laffer curve is typically represented as a graph which starts at 0% tax, zero revenue, rises to a maximum rate of revenue raised at an intermediate rate of taxation and then falls again to zero revenue at a 100% tax rate.

One potential result of the Laffer curve is that increasing tax rates beyond a certain point will become counterproductive for raising further tax revenue. A hypothetical Laffer curve for any given economy can only be estimated and such estimates are sometimes controversial. The New Palgrave Dictionary of Economics reports that estimates of revenue-maximizing tax rates have varied widely, with a mid-range of around 70%.

Optimal

Most governments take revenue which exceeds that which can be provided by non-distortionary taxes or through taxes which give a double dividend. Optimal taxation theory is the branch of economics that considers how taxes can be structured to give the least deadweight costs, or to give the best outcomes in terms of social welfare. The Ramsey problem deals with minimizing deadweight costs. Because deadweight costs are related to the elasticity of supply and demand for a good, it follows that putting the highest tax rates on the goods for which there is most inelastic supply and demand will result in the least overall deadweight costs. Some economists sought to integrate optimal tax theory with the social welfare function, which is the economic expression of the idea that equality is valuable to a greater or lesser extent. If individuals experience diminishing returns from income, then the optimum distribution of income for society involves a progressive income tax. Mirrlees optimal income tax is a detailed theoretical model of the optimum progressive income tax along these lines. Over the last years the validity of the theory of optimal taxation was discussed by many political economists.

Rates

Taxes are most often levied as a percentage, called the tax rate. An important distinction when talking about tax rates is to distinguish between the marginal rate and the effective tax rate. The effective rate is the total tax paid divided by the total amount the tax is paid on, while the marginal rate is the rate paid on the next dollar of income earned. For example, if income is taxed on a formula of 5% from $0 up to $50,000, 10% from $50,000 to $100,000, and 15% over $100,000, a taxpayer with income of $175,000 would pay a total of $18,750 in taxes.

Tax calculation

(0.05*50,000) + (0.10*50,000) + (0.15*75,000) = 18,750

The "effective rate" would be 10.7%:

18,750/175,000 = 0.107

The "marginal rate" would be 15%.