Business, Legal & Accounting Glossary

Definition: Taxation


Quick Summary of Taxation

Process of instituting a charge against a legal entity’s person, property or activity for the support of government. (For example, income taxes, sales taxes, duties and levies.)

What is the dictionary definition of Taxation?

Dictionary Definition

Charge against a citizen’s person or property or activity for the support of government.

  1. The act of imposing taxes and the fact of being taxed.
  2. A particular system of taxing people or companies
  3. The revenue gained from taxes

Full Definition of Taxation

Taxation is the process of collecting taxes from taxpayers. There may be several taxpayers in an economy like individuals and other entities like business establishments and corporations. There are several areas of taxation like the income of individuals and companies for example. Tax is also imposed on benefits in certain countries like the United States of America.

Taxation is the power of government in which a governing authority accumulates revenue by levying a charge on its citizens’ economic activity.

Taxes are important from an economic point of view in countries all over the world. Taxes are a good way of collecting revenue for governments and this money comes in handy for the governments when there is an emergency. Money collected by way of taxes helps the governments to deal with critical economic crises as well.

Revenue collected via taxation is typically referred to as “taxes.” In the United States, income, sale of goods, estates, and some gifts are commonly subjected to taxation. Tariffs are a form of taxation imposed on imported goods, although it can also be imposed on exported goods by some countries (i.e. China). Businesses and governments both have the power to impose fees, but businesses do not have the power of taxation. The burden of taxes falls differently depending on the form of taxation used. Progressive taxation imposes a greater tax burden on the wealthy than the poor because the percentage of tax charged increases with income. The structure of the personal income tax system in the U.S. is considered progressive. Regressive taxation imposes more of a burden on the poor. Proportional taxation applies tax burdens to the poor and wealthy equally.

Direct And Indirect Tax

Direct taxes are those that are collected straight from taxpayers by the tax collecting authorities. A major example of direct tax is the income tax.

An indirect tax is one whereby tax is collected by an intermediate entity like a shop owner or a retailer for example. The burden of paying an indirect tax may be shifted to others. Sales tax is an ideal example of indirect tax. Shop owners or retailers shift the burden of sales tax on buyers.

In case of sales tax, it is imposed on the product sold, by the tax authorities. Sellers collect the tax from buyers by increasing commodity price. When a commodity is sold, the buyer virtually pays taxes along with the price of the product. This is an indirect way of collecting taxes.

Business Taxes

There are at least 11 various types of business taxes that are collected all over the world.

They may be enumerated as below:

  • Advance corporation tax
  • Partnership taxation
  • Business and corporation tax
  • Pay-as-you-go tax
  • Corporate tax
  • Permanent establishment
  • Excess profits tax
  • Transaction privilege tax
  • Gross receipts tax
  • Undistributed profit tax

Fuel Tax

There are different fuel taxes that are collected in various countries all over the world. For example, fuel taxes collected in the United States of America are different from those in Australia and Canada. Some common fuel taxes collected everywhere in the world are gas guzzler tax and hydrocarbon oil duty.

Income Tax

Income tax is basically a tax that is collected on the income of individuals. There are specific rates that apply for particular income brackets and normally rate is directly proportional to the amount that is being taxed. Laws of income taxation are different in various countries. However, there are certain countries where there are minimum limits of taxation, which means an amount that is lesser than the specified minimum tax limit cannot be taxed.

Examples of Taxation in a sentence

One of the greatest problems facing taxation in the French agricultural sector is its lack of elasticity and ability to adapt to local conditions.
Money had to be raised by taxation, and at a meeting of the States General the Governor proposed an immediate tax of 2% on all property, a tax of 6% on transfers of real estate and a tax of 10% on the sale of all articles of commerce; the latter of the two taxes to be granted in perpetuity.
Companies have directly benefited from a low rate of taxation.

Synonyms For Taxation

revenue, tax income, tax revenue

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Taxation. Payroll & Accounting Heaven Ltd.
August 16, 2022
Chicago Manual of Style (CMS):
Taxation. Payroll & Accounting Heaven Ltd. (accessed: August 16, 2022).
American Psychological Association (APA):
Taxation. Retrieved August 16, 2022
, from website:

Definition Sources

Definitions for Taxation are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 29th March, 2020 | 0 Views.