4.4 The Tax System

Meaning: the system of compulsory, unrequited payments to the state (compulsory and non- penal — the definition's careful edges: a fine is not a tax; a fee is requited). Classification andtypes:1. Direct vs indirect (the syllabus's pair): direct — the burden rests where it is levied (income tax, property tax — the taxpayer pays and feels it); indirect — collected from one, shifted to another (VAT, customs, excise — the consumer pays in the price: the shifting is the economics, the incidence the question);2. By rate structure:progressive (rate rises with base — income tax's brackets: the equity instrument), proportional (flat rate), regressive (rate effectively falls with income — the poor's consumption taxes: VAT's burden-share is regressive if uncompensated — the standard critique and the transfer system's answer);3. Specific Nepali types: income tax (with the schedular-and-global design), VAT (the dominant modern instrument), customs and excise (the border-and-bottle pair), property and registration taxes (the transaction-linked), the local taxes (the local governments' business, property and house taxes — the 2017+ local revenue revolution). The canons of a good tax system (theexam's classic — Smith's four + the modern additions): | Canon | Author/era | Meaning | |---|---|---| | Equality/Equity | Smith | taxation by ability to pay (progressivity's warrant) | | Certainty | Smith | the taxpayer knows what, when, how much —…