Even before the advent of currency, men already exchanged goods and services, that is, the price of something was what you could offer in return. In the society we live in then, not to mention, everything has a price: the worker's salary is the price of his service, for example. We know that the State has a series of obligations, such as health, education, security, etc. Obviously, all of this also comes at a cost – and a high one. So, how does the State fund its activities?
In order to guarantee the provision of services and fulfill its obligations to society, the government coercively withdraws a portion of its wealth: taxes. This coercion means that individuals do not have the right to choose: they either pay or suffer the consequences (fines, legal and administrative sanctions, etc.). In some countries, non-payment of taxes is such a serious thing that it can even result in an individual's imprisonment.
In theory, citizens should get back the money that was paid for providing services. However, we know that most of the time this does not happen, since certain services are provided in an inefficient and even precarious way, at times.
According to economic theory, the higher the price, the lower the demand. What does this have to do? Well, the numerous taxes that are directly levied on the products cause prices to rise enormously. To give you an idea, according to a report prepared by the Brazilian Institute of Tax Planning (IBPT), without taxes, the prices of certain products would fall by as much as 83.07%. Thus, with the increase in prices caused by taxation, consumption falls, inhibiting economic development.
Even so, we all know that taxes are essential to fund state activities. However, the big question is the application of the money collected and whether it is being used effectively and efficiently to provide social welfare.
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By James Dantas
Brazil School Team
Taxes - Economy - Brazil School
Would you like to reference this text in a school or academic work? Look:
SCHOOL, Team Brazil. "What is Tax?"; Brazil School. Available in: https://brasilescola.uol.com.br/economia/o-que-e-imposto.htm. Accessed on July 27, 2021.
