Most people pay taxes every year. What are the benefits of paying those taxes? Why do we even pay taxes? I strongly believe that after reading this blog, you will be able to tell why paying taxes is such an important duty and obligation imposed on any person with taxable income.

The word tax comes from the Latin word taxare but the Romans were not the first civilization to impose taxes on their citizens. We know the ancient Greeks and Egyptians levied taxes on their own people and foreigners, as did the Hebrews.

The direct benefit of paying taxes for everyone is that they are used to pay for services that government provides to communities. In a modern society like Uganda a government needs administrators and clerks, police forces, emergency forces such as firefighters, engineers and maintenance workers for streets and buildings, schools, and to pay for property used and goods consumed by the government servants.

As large cities develop in Uganda, leaders and their communities have to devise ways to compensate the people who delivered services to the communities.  As an example, if a city of 30,000 people needed to pay someone to clean the streets, they might rely on community donations of food and shelter but taxes help the government to have money to pay for such services.

Another important reason is that taxes are imposed to prevent consumption of certain goods eg the tax imposed on alcohol to prevent the society from over consuming it.

Classification of taxes.

Taxes are classified as regressive if they affect poor people more than wealthy people and as progressive if they affect wealthy people more than poor people. Progressive taxes have been popular throughout history, probably because wealthy people were easier to tax and the taxes would weaken their ability to raise their own armies.

There are four basic types of taxes and all these have been used throughout history:

Property taxes

Income taxes

Estate taxes

Consumption taxes

Property taxes 

These are most often assessed on an annual basis. A portion of the value of the property must be surrendered to the government. In current practice that is a monetary payment made to URA known as Rental tax.

Income Taxes

These have been used by many countries in many different periods of history. It is not easy to collect an income tax because it requires a lot of record keeping and auditing. Income taxes are also unpopular because people feel deprived of their means on a continual basis.

Income taxes are usually progressive but rarely deemed fair by anyone. Only the poorest of citizens are exempted from paying income taxes. These include taxes on business and employment income

Estate Taxes 

were first used by Augustus Caesar to help pay the empire’s military expenses. Caesar’s estate taxes were modest by modern standards but they proved to be a rich source of income for imperial coffers. Unlike income taxes, which can decline when recessions put people out of work, estate taxes are driven by the continual turnover of property as heads of families die.

Kings and governments have also used estate seizures to pay their finances. Estate seizures still happen today, most often as punishment for criminal activity. The goods and property seized from an estate can be sold to raise money for the government.

Consumption taxes

These take the forms of sales taxes (paid at the time a product or service is purchased), tariffs (paid when goods are imported into the country), and usage fees (such as tolls for bridges and roads). Consumption taxes are easier to collect than income taxes but they also require extensive record keeping and auditing.

Consumption taxes are popular with local governments and they include taxes imposed to prevent consumption of certain elements like alcohol that may be harmful to the lives of the citizens.

In short, the benefit of paying taxes is to ensure that everyone in a community enjoys the services provided by government. Whether the taxes pay for defense, infrastructure, education, or public safety the intention is that they create a safe and stable environment in which people can live.

By Hamwada Innocent

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