Personal Tax Inome Mechanism

A system that relates to raising money to finance the government in terms of revenue used for building dams, roads, to operate schools and hospitals, to provide food for the poor and medical care to the elderly including national defense and hundreds of other purpose is known as taxation.
Government imposes many types of taxes. In most developed countries individual pay income tax when they earn money, consumption taxes when they spend it, property taxes when they own a home or land and in some case estate tax when they die.
Taking into consideration the individual tax as also called a personal income tax; we see that it is a tax on a person’s income. Income in this light includes; wages, salaries, interest earned by savings account, earnings from rented properties and dividends from stocks. Earning citizens of a country or tax payer, is expected to compute his or her tax liability and this can be done in four (4) ways. This includes:
• Computing of adjusted gross income i.e. one’s income minus expenditure incurred in earning the income.
• Converting of adjusted gross income to taxable income. This is done by subtracting the amount of income subject to tax called exemptions and deductions.
• The tax payer calculates the amount of tax due by consulting a tax table which shows the exact amount of tax due for most levels of table income.
• By subtracting tax paid during the year and any allowable tax credits to arrive at final tax liability.
This is then enclosed and sent to the government for further processing.
Income taxation enjoys a wide spread support. This is because income is considered a good indicator of an individual’s ability to pay. Many tax payers, rather than owing money, receive a refund from the government after filling a tax return typically because they had too much tax withheld from their wages and salaries during the year. Some low income earners in some countries may also receive a refund because of the earned income tax credit (a federal government subsidy for the low income earners).
Income taxes are however, hard to administer. This is because measuring income is often difficult, considering people that receive part of their income in-kind.
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