 Why do we pay taxes? Governments provide public services such as police services and roads to the public. The government also pays the salaries of civil servants. The public does not pay directly for these goods and services or for the time of public servants when they visit government offices, but indirectly by means of taxation. The government must therefore regularly decide how much to spend, what to spend it on and how to finance its expenditure. This is the reason why we pay taxes. We all want government services such as better education, more policing and better roads. All these things cost money. The government is faced by continuous demands to increase its expenditure as people want more goods and services from the government. These demands include free houses and free basic services such as electricity and water. The provision of these services to the needy paid for by means of taxes raised from the more fortunate amounts to a large redistribution of income from the payers to the recipients. The finances of a government are much like that of a household, although the amounts spent by government far exceed that of a household as its responsibilities are much larger. The government has expenditure and requires income to cover such expenditure. The difference between these two items represents a positive or a negative fiscal balance. If expenditure exceeds income, the government must borrow the shortfall. The government pays interest on these borrowed funds while the borrowed capital must also be repaid when the time period for which the money was borrowed ends. The government can therefore not borrow unlimited amounts of money. People do not like to pay taxes but nevertheless expect the government to supply them with goods and services. It is therefore important for the government to make sure that taxpayers feel they get the value for the money paid as taxes. Types of taxes in South Africa South Africans pay a number of taxes to fund the government's expenditure. The most important of these are personal income tax, company tax and value added tax. Next we look at these and some other types of taxes in more detail. Personal income tax Personal income tax is paid on income earned. People earning income under the tax threshold during 2015, the tax threshold was equal to the taxable income of 73,650 rand. Do not pay income tax. But all annual income earned above the threshold is subject to tax. South Africa has a system of progressive income tax. This means that the personal income tax burden increases in line with increasing income. Value added tax, VAT Value added tax, commonly known as VAT, is the second important form of government revenue. VAT is charged on all transactions and paid on most purchases. Only a small number of payments and fees, for instances, penalties and license payments, are VAT exempt. All people, irrespective of whether they are poor or wealthy, pay VAT. Corporate income tax The third important source of government income is company tax. When companies make profits, these profits are subject to tax. If many companies are profitable, the government will collect more tax income that can be used to provide services for the needy. Other types of taxes The government also collects a number of other taxes. Fuel is subject to tax and this tax is paid by everybody that purchases fuel. Another form of tax is excise duty on tobacco and liquor. These taxes are often referred to as SIN taxes. The more important point, however, is that these taxes can be legally avoided. People who do not smoke will not pay excise duty on tobacco. Likewise, people who do not consume alcohol will not pay excise duty on liquor. However, it should be clear that whether you are rich or poor, it is inevitable that at some stage you will pay some type of tax. What happens if I do not pay my taxes? It is illegal not to pay taxes and such action is known as tax evasion. People engage in tax evasion because the payment of taxes is unpopular. This usually refers to the evasion of personal income tax while, for example, VAT is already included in the prices of goods and services making it much more difficult to evade. An example of tax evasion is someone who sells goods at the local flea market but does not declare the profit made as income. Tax evasions should not be confused with tax avoidance. Tax avoidance is quite legal and is the practice of exploiting so-called tax loopholes found in the taxation laws of a country. It usually requires the help of a taxation expert or financial planner. It does, however, lower the government's tax revenue and could therefore create some frustration amongst those taxpayers who are not in a position to avoid tax. Do all people in all countries pay taxes? There are quite a few countries where the citizens of the country are not required to pay personal income tax. These are mostly countries with rich natural resources such as oil or gas reserves from which sufficient government revenue can be obtained and thus there is no need to raise more money by means of personal taxation. However, in most of these countries, other types of taxation such as high corporate income tax especially for foreign-owned companies still applies. Conclusion The famous French writer and philosopher Voltaire said that the art of government consists of taking as much money as possible from one class of citizens to give to the other. A statement that really underscores the role of taxes and redistribution by the government. Government needs tax income to fund its activities and all people have a civil responsibility to pay their fair share of the tax burden. If everybody pays their fair share, the tax burden on everybody will be smaller. To paraphrase Benjamin Franklin, the only things certain in life are death and taxes.