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What are Taxes and Why Do We Pay Them?

Team StoryWeavers|February 01, 2022, 16:53 IST|

Image showing an illustration of a laptop and papers of tax calculations

 

Every year around March you may have heard adults around you grumble and stress out about their taxes. Or you may have seen the terms ‘VAT’ or ‘GST’ added on the bill when you purchase something. Those are all different types of taxes that we all pay.

What exactly are taxes and why do we pay them if nobody seems to like paying them? Let’s find out:

What are they?

Taxes are money collected by the government from every citizen of a country.

There are different types of taxes that we pay, which are calculated depending on different factors. There is income tax, which is calculated based on the amount of money someone earns every month and year. A percentage of their earnings is given to the government as taxes. Some governments, like Russia for example, impose a flat tax — which means everyone pays the same amount of tax, no matter what their income. Some countries have progressive taxes, which means the amount you pay varies as per your income. India, like most countries, has a progressive tax system, where people pay a different percentage of money depending on their income.

Another kind of tax we pay almost every day is the sales tax and goods and services tax. These are taxes that are paid when we purchase any kind of goods or when we go to the restaurant or to the movie theatre, or even when we travel somewhere.

Companies and institutions pay a corporate tax depending on how much profit or loss they make in a year.

Everyone from the President to your cousin, who just got their first job, pays taxes — nobody is exempt from it. In fact, it’s illegal to not pay your taxes and you can be forced to pay a hefty fine or even go to jail if you don’t.

Why we pay taxes

The government collects taxes from everyone and spends it on things everyone needs. The footpaths you walk on, the park you play in, the train or bus you take to your friend’s house, your school textbooks — they’re all paid for by the taxes.

In fact, taxes have been around for thousands of years. In olden times, way before the invention of paper money, citizens would pay taxes in the form of their crops or animals or even food, which would be given to the king, and it would be calculated based on how much land a person owned and how much they earned from that piece of land. Ancient Greeks and Romans would even levy taxes on food and drink consumed in restaurants, just like today. Of course, some rulers weren’t very nice people and would impose high taxes on poor people in exchange for not attacking them (yes, you paid to not be attacked in mediaeval times!). In India, the modern taxation system was introduced in 1860 by Sir James Wilson, a finance minister in the British empire. Since then, the laws of taxation have been updated multiple times.

Today, of course, the tax system is very different and undergoes some minor changes every couple of years.

Now that you know about taxes and why they’re important, next time observe the public services around you and think of how they’re necessary for everyone to lead easier lives.

About the Author


Madhavi is passionate about everything to do with books, art, literature, films, trivia and food. A former journalist, she believes that asking questions makes life interesting.

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