A tax is money which must be paid to the government for participating in some kind of economic activity.
The money which is generated from tax is then used by the government to provide public goods such as healthcare, education, transportation, and security etc.
There are many different types of tax such as income tax, sales tax, property tax, business tax, and environmental tax, to name a few.
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Key terms:
Direct tax – a tax which is paid by the person or organisation directly to the government (e.g. income tax, corporate tax)
Indirect tax – a tax which is paid by a person or organisation, but the cost is ultimately incurred by another (e.g. VAT, import tax)
Public spending – spending by the government throughout the economy on public goods and services (e.g. education, police, healthcare)