Taxes are the main chapter of the income of the State as a whole, although not the only one. In effect, the Administration also enters money through fees (which refer to the provision of specific services or activities), when it privatizes public companies or when it issues debt. Speaking of issuing, the State also collects a large income through the central bank, because, being the monopolist of the issuance of banknotes, it pockets the difference between the value of the banknotes and coins (that is, the value of what they can buy) and what it costs to produce them. Click here for more information about independent contractor taxes.
Regarding taxes, they are usually divided into two categories: direct ones, which depend on the payment capacity of specific taxpayers and that they cannot transfer (they have to pay and get annoyed), and indirect ones that fall on acts of the people, such as purchases or sales, and that are charged in the prices of those acts and are thus transferred to the final consumer. The two most important direct taxes are Personal Income Tax, and Corporation Tax, which taxes the profit of companies. And the two most important indirect taxes are VAT, and excise taxes on fuels, alcohol or tobacco.
But the different Public Administrations also collect taxes such as urban contributions, vehicle registration or economic activities, on assets, on inheritance, on transfer of assets, and many more, without forgetting the important contributions to Social Security, which also are taxes.
The Tax Impact
The impact of taxes on a country’s economy is enormous. Let us think of total public spending, which is a way of measuring what the Administration costs, because all their spending has to be paid by citizens in one way or another, today or in the future (due to public debt). Well, that total public spending in Spain and most of the countries of the world is close to half of what we call Gross Domestic Product (GDP), which is the total wealth we generate; In other words, despite the fact that they tell us that we live in a market or capitalist or even liberal economy, the truth is that the public sector is very large, and that we are talking only about taxes and expenses, to which we should add the set of regulations established by the authorities.
It is the measurement or valuation of the taxable event. In article 50 of the General Tax Law it is said that “it is the monetary or other magnitude that results from the measurement or valuation of the taxable event.”
In order not to get involved, in IRPF the taxable base is the sum of all income, of all income, either in money or in kind (payment for the children’s school, transportation, etc.) that a person achieves. A certain tax will then be applied to this income to calculate how much you have to pay in the corresponding tax.