Everyone knows that taxation is necessary in a modern state . Without it, it would be impossible to pay the soldiers and policemen who protect us; nor the workers in government offices who look after our health, our food supplies and our water, and who do all the other things that we cannot do for ourselves; nor also the persons who govern the country for us. By means of taxation, we pay for things that we need just as much as we need somewhere to live and something to eat.
Though everyone knows that taxation is necessary, different people have different ideas about how taxation should be arrange d. Should each person have to pay a certain amount of money to the government each year? Or should there be a tax on things that people buy and sell? If the first kind of taxation is used, should everyone pay the same tax, whether he is rich or poor? If the second kind of tax is used, should everything be taxed equally?
In most countries, a direct tax on persons, called an income tax , is used. It is arrange d in such a way that the poor people pay nothing, and the percentage of tax grows greater as the taxpayer 's income grows.
Countries with direct taxation nearly always have indirect taxation too. Many things imported into the country are taxed . Of course, it is the people who buy these imported things who really have to pay the duties , in the form of higher prices. In some countries, there is also a tax on things produced in the country itself. If the most necessary things are taxed , a lot of money is collected, but the poor people suffer the most. If unnecessary things like jewels and fur coats are taxed , less money is collected, but the tax is fair er because the rich pay it.
Probably this kind of indirect taxation, together with a direct tax on incomes which is low for the poor and high for the rich, is the best arrangement .