Taxes

Taxes are the cornerstone of how governments fund the services and infrastructure societies depend on. Whether commuting on public transport, sending children to state schools, or visiting a hospital, taxes help create that environment. In the UK, HM Revenue and Customs and HM Treasury ensure taxes are collected and budgets set. Tax impacts everyone: it affects disposable income, the cost of goods, and business decisions on investment and hiring. Understanding this mechanism is key to appreciating government functions in both national and daily life. Governments collect tax through various channels, each with differing impacts. The most significant for individuals is income tax, deducted from wages or salaries; For businesses, corporation tax is levied on profits. Purchases of goods or services are subject to consumption taxes like VAT in the UK or sales tax in the US. Other taxes include excise duties on tobacco or alcohol, council tax, and property or business rates. Economic growth also plays a key role—rising wages and spending increase tax revenue without raising rates. This balance is vital for budgeting and funding public services. Taxes are not only a means to collect revenue; they are also powerful tools in fiscal policy for shaping the wider economy. When the economy is in recession, a government might lower taxes or increase spending to encourage economic activity— an expansionary stance.