The compulsory transfer of a portion of a country’s private resources to the government. The resources are then spent for the purposes of governing (roads, sanitation, education systems, legal systems, police, military, etc), changing prices in order to regulate some cost or benefit, and/or promoting certain cultural and scientific research and dissemination. In economic terms, a tax is a form of price-based resource transfer. Governments also obtain resources through voluntary donations, borrowing, confiscating criminal proceeds and/or penal fines.

There are three main types of taxes: taxes on what you earn, taxes on what you buy and taxes on what you own. Each category may have subcategories, credits and deductions. There are many different taxation systems in use throughout the world, and each one has a unique structure. For example, some governments require employers and employees to pay into publicly funded retirement and health care programs. These payments are often made at a flat rate, but in others, rates increase as income levels rise.

In addition to income and property taxes, excise and carbon taxes are commonly levied. Excise taxes are employed to offset externalities, or harmful side effects that are not reflected in the purchase price of goods and services. For example, a excise tax on cigarette consumption reduces consumption and related healthcare costs, while a carbon tax aims to curb pollution. Other forms of taxes that reduce deadweight costs include user fees such as gasoline taxes and road tolls, as well as excise taxes on alcohol and other vices.