This article outlines the main tax factors that have the biggest impact on your business. It also talks about what you must know about when managing a business.
Taxes and Leakage Factors: Everything that You Must Know When Managing a Business
Are you running or working for a small business? If so, this article is for you! It will give you an overview of all the major tax factors that could be affecting your company and how they interact with each other.
Your knowledge in this area will help to ensure better long-term performance as well as give your business more free time to focus on its goals instead of just trying to survive day-to-day in production.
Here are some points discussed about Taxes and Leakage Factors-
In most of the cases, taxes are levied by the government. The government imposes these taxes to make sure that a certain amount of money is received to its treasury.
This sum of money is called tax money and goes directly into the national or local treasury.
2. Tax Receipts from Sales
The way you calculate tax receipts from sales can be very simple – you add up the sales amount and then deduct all the amount which is necessary for cash flow, if it’s your company’s normal practice.
This includes profit on sale, cost of goods sold, out-of-pocket expenses for sales personnel, etc. This deduction will further be discussed later in this article.
The following section will give you an overview of all the various taxes that fall under personal income tax, employment tax, capital gains tax, etc.
This is to give you an idea of how they affect your company and its financial performance.
3. Income Tax (Personal)
Income tax is one of the major personal taxes levied in most countries around the world. It’s important to mention here that no two countries levy the same income taxes, so what you have in India might not be applicable to another country like Australia.
The basic definition of income tax is – it’s a tax levied in order to receive money from the government’s treasury and this sum of money goes directly into its treasury.
- (a) The main purpose of income tax is to regulate financial activity by charging a given percentage of a taxpayers’ income.
Income tax is deducted from each and every citizen of the country, and this includes a person who is working, freelancer, entrepreneur or any one who is earning money.
- (b) Another reason for income tax being implemented is to keep track of the amount that people are making on an annual basis.
Most countries today share their tax data with each other under an agreement called Double Taxation Avoidance Agreements in order to make sure that no individual has to pay more than one time for the same income.
4. Value Added Tax (VAT)
The main purpose of VAT is to ensure that no one is able to avoid paying taxes by making use of something which is not necessary for the earning of money. It’s a tax that is levied on the goods and services that are either consumed or purchased by people.
This tax has been implemented in order to ensure complete transparency, and it’s in place throughout the entire world so no person can try and evade paying it.
- (a) In most cases, this tax is deducted from goods and services that are purchased by customers. This means that when you go shopping, you will be forced to pay this tax as soon as you finish purchasing whatever item/s you’ve bought.
- (b) Another way in which you could be paying VAT is through your bank. This money is directly deducted when people receive payments, and it’s important to know that all banks now charge a small percentage on money transfers so they can also make their money back and make a profit.
5. Property Tax (Land)
This tax is levied in order to make sure that the government has enough money in the form of revenue to cover all its expenses.
Property taxes are usually set by local governments, and they’re normally used to cover costs associated with maintaining public schools, fire departments, police protection, etc. in a particular area or area of town or city.
6. Stamp Duty
This is another tax used for the purpose of making sure that the government has enough money to cover its expenses. This tax is usually levied on businesses, and it’s imposed on the legal documents of a company.
This could be anything from share purchases, stock certificates, etc. All of these have been documented in writing, so they need to pay this stamp duty so they can start the business in an orderly manner.