Taxes, are the mandatory contributions charges to individuals (people) or businesses by a government entity — could be national, regional, or even local.

 

Tax revenues (money the government gain from charging the taxes) finance government activities, that can include services and public works, such as roads, schools, or programs such as Social Security, etc.

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Now, in economics, taxes are paid by whoever actually ends up covering the cost, whether that’s the business being taxed or the customers who buy from that business.

 

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Let me explain it first:

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For example, if a company has to pay a tax, it might raise its prices so that customers end up paying more—meaning the customers are the ones really paying the tax.

 

The business needs to pay the taxes first because the government requires companies to follow tax laws and report their income, payroll (total amount of money a company pays to its employees for their work), and sales.

 

So, the company is legally responsible for collecting and sending those taxes to the government. But to avoid losing money, many businesses pass those costs on to customers by increasing prices.

 

In business, there are different kinds of taxes to think about, like taxes on employee wages (the money a worker earns for their work), taxes on the company’s income, and taxes added to the price of products (like sales tax).