Taxes
Taxes are compulsory payments to the government that fund public services like schools, hospitals and roads.
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Taxes are compulsory payments to the government that fund public services like schools, hospitals and roads.
- Income tax is paid on earnings
- VAT is paid on spending
- Progressive taxes rise with income
🧠 Quick quiz
Three questions. Score 2 or more to complete the topic.
What is Taxes?
Within Economics & Civics, which covers money, markets, business, government, law and citizenship: how societies are organised and run, this topic explains Taxes. Economics and civics topics explain how money, markets, laws and government affect people, so each topic here pairs a clear definition with a model.
Check that you can explain Taxes in your own words and give one example from everyday life. If you can do that, you have understood the core idea.
Understanding Taxes helps you read the news critically and weigh up policies, choices and arguments about society.
Taxes in detail
Taxes are compulsory payments to the government, used to fund public services such as health, education, roads and defence, and to redistribute income. Direct taxes are paid by people on their income or wealth, such as income tax, and indirect taxes are paid on spending, such as VAT.
A progressive tax takes a higher proportion of income from higher earners, a proportional tax takes the same percentage from everyone, and a regressive tax takes a larger share from poorer people, as with some taxes on goods. Corporation tax applies to company profits. Good taxes are fair, certain, convenient and efficient. Governments may use taxes to discourage harmful goods.
How the interactive helps you understand Taxes
Watch the pie chart in the interactive. Use any sliders or buttons it offers to change the values and see how the pie chart responds.
Before you change anything, predict the result. Then change one value at a time and check whether your prediction was right. This is a quick way to build a correct mental model of Taxes.
Real-life uses and examples
- Use Taxes to weigh up the pros and costs of a policy or decision.
- Explain Taxes to a classmate using a choice you make yourself, such as spending pocket money.
- Give a balanced answer about Taxes by considering more than one point of view.
Common mistakes to avoid
- Confusing a short-term effect with a long-term one.
- Giving an opinion without evidence or a clear economic or civic reason.
- Learning the definition without testing it. Use the quiz and the interactive to check that you can apply the idea.
Frequently asked questions about Taxes
What is Taxes?
Taxes are compulsory payments to the government that fund public services like schools, hospitals and roads.
What are the most important points about Taxes?
The main points are: Income tax is paid on earnings; VAT is paid on spending; Progressive taxes rise with income.
Why is Taxes useful?
Understanding Taxes helps you read the news critically and weigh up policies, choices and arguments about society.
How can I practise Taxes?
Open the interactive at the top of this page and change the controls one at a time. Predict the result before each change, then take the three-question quiz. A score of two or more marks the topic as complete on this device.
Which topics are related to Taxes?
Related topics in Economics & Civics include Gross Domestic Product, Entrepreneurs, Marketing.