What is tax?
The amount of tax you pay is decided by elected politicians in your country, who meet in parliament. The fact that representatives of the people decide on tax issues gives tax legitimacy. Tax rates and other tax arrangements (called ‘tax bases’) can be reviewed and changed by your politicians.
Find out who decides what to tax in your country.
Check out your national tax website.
Personal taxation
When you start working and your salary reaches a certain level, you have to pay ‘income tax’. The amount is based on how much you earn, and varies from country to country.
Property tax
When somebody possesses or inherits a house, an apartment, a building or land, they are inheriting property. In each EU country, if you own property, you are required to pay tax on it.
Corporate tax
Company tax — also referred to as corporation tax — must be paid by companies, clubs, co-operatives and unincorporated associations on the profit that they make. The rules are set by national authorities and are not the same in all countries.
Environmental tax
This addresses pollution. The higher the tax you have to pay when buying or using polluting products, the less likely you are to buy or use them. So the tax discourages behaviour that will harm the environment. Most of the time, this tax is applied to energy products, motor vehicles, air and water pollution, etc.
Consumption tax, Value Added Tax (VAT)
The EU has standard rules on VAT, but these rules may be applied differently in different countries. Normally you pay VAT on all goods and services.
You pay tax every time you buy something online or travel
Usually travellers are allowed to bring in goods up to a certain value or amount. Duty is charged on anything over that limit.
If you are buying goods online from another country, you may have to pay customs duty, depending on where the goods are posted from.
Customs duties are not charged on goods that come from within the European Union. If you buy a product from a non-EU country, you effectively become an importer. This means you have to pay customs and excise duty as well as Value Added Tax (VAT) payments.
It’s true that there was once a time when we didn’t pay tax. But this was also the age of cavemen! Back then, individuals had to protect their family, hunt, build their house and do a lot more besides – and without any support.
From hunter-gatherers to city dwellers
Step by step, people started living together in villages, then in cities. They established a ‘social contract’, providing for community support.
This support includes building roads, teaching children, taking care of those who are ill – things that make all of our lives easier. To pay for these services, everyone has to contribute, and they do this through paying tax.
Paying tax is kind of like going on holiday with friends
Have you ever been away with friends?
Have you ever been away with friends? Next time you do this, ask everybody to put some money in a piggy bank and use this pooled money for common expenses like food. This is much easier than trying to calculate how much everyone owes after each meal or food shop! In the same way, your government gathers money to simplify citizens’ lives!