By continuing your visit to this site, you accept the use of cookies. They ensure the proper functioning of our services and display relevant ads. Learn more about cookies and act

Not yet registered? Create a OverBlog!

Create my blog

Lump-sum tax: The facts

Lump-sum tax is a fixed amount of tax payable by everyone without considering their income levels. This tax deduction is not influenced by the different income levels of individuals, ownership of property, lifestyle or how they spend. This article gives you a detailed account of lump-sum tax.

Forms of lump-sum tax

Lump-sum tax is considered a regression tax because the poor pays more tax in proportion to their income as compared to high income earners.
Common forms of fixed tax are: Personal property tax
This is charged on personal property owners such as cars and equipment, regardless of the individual’s ability to pay or income level. Real estate tax
This tax is based on per unit or per lot, thus enforces real property owners to contribute a fixed tax amount. Poll tax It is payable by all adult residents or voters, without considering their affordability and source of their income.

Who pays for lump-sum tax?

This tax is payable by all citizens, despite of their wealth, income and paying abilities. All adult residents who get their income through salaries, remunerations, lump-sum investments, gratuities, lump-sum retirement, lump-sum pension, income from lump-sum death benefits and property owners are subject to this tax.

Positive points

It is a source of income for treasury to finance government expenditure like infrastructure development. Lump-sum tax is easy to calculate, easy to account for and everyone pays a flat amount. It alleviates discrimination and creates transparency among citizens against economic development by removing the moral dilemma of other people having to pay more tax for the same service offered like the use of basic government infrastructure. Security concerns Lump-sum tax payment protects private information for individuals such as
lifestyle, wealth and income because it is applied blindly. It also reduces governement costs which are related to tax compliance.

Negative points

Lump-sum tax does not take into account the various income levels and equity, thus in principle, the lower income earners actually pay a high proportion of their income to tax, as compared to high income earners. It does not consider the ability of individuals to pay. This will result in a wealth gap among citizens, as the poor becomes poorer. Fixed tax is simply based on existence and ownership, and does not consider other factors like affordability.

Same category articles Taxation

The punishments for business fraud in the UK

The punishments for business fraud in the UK

The Fraud Act of 2006, which came into force in January 2007, applies in England, Wales and Northern Ireland, and repeals all previous theft acts. It replaces them with the single offence of fraud, and denotes that this could be committed in one of three ways: false representation, failure to disclose information when there's a legal duty to do so, and abuse of position. This article will discuss the penalties for these offences.
How to apply for financial aid in the UK

How to apply for financial aid in the UK

This article will detail out how to apply for financial aid in the United Kingdom. If you are stuck for money and need help, this article should help you. Read on and learn more.
Benefits of setting up a trust fund

Benefits of setting up a trust fund

Setting up a trust fund is beneficial to both the recipient of the trust or the beneficiary, as well as the creator of the trust or the trustor. For beneficiaries, a trust fund account ensures that there is money put aside for their current needs or for future use. For trustors, establishing a trust fund is like putting up a tax-free gift which thus allows them to enjoy certain tax benefits. This article provides an interesting insight into the benefits of setting up a trust fund.
Living trust: The facts

Living trust: The facts

Do you have a living trust or are you considering opening one? This article will be discussing all the facts about living trusts and what purpose they serve.