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World Income

World income distribution

In economics, the most weighty and profound questions is why some countries in the world are rich while others are poor; why some country’s income is higher than the others. Economists have over and over again tried to explain the disparities that cause the gap in incomes in different countries.

The main factors causing the differences have been cited as literacy or education level, the capital stock and the institutions that define property rights. Note that these three main factors can be influenced by the government with suitable policies in place. Economists use the GDP density, which is arrived at by multiplying the DGP per capita of a particular area by the total population density of the area. The GDP density typically demonstrates the effects of climate and location (geography) on the area’s economy, which hugely impacts on the world income.

On the flip side, economists try to understand the rate at which the inhabitants of a country are poor. This they do, not by using the country’s per capita income, but by checking on how income is equally or unequally distributed across the population.

World income patterns can be analyzed by studying, country by country, on the number of households that have an income in each given income bracket, the number of households that actually fit into an income band and indeed the income of a particular age group.

Uses of Tax Revenue

Correspondingly, the taxation system of a country will directly or indirectly impact on the world income. This is to say that the collected revenue is used to carry out many functions such as improving on the economic infrastructures, public works, protection of property, enforcement of public law and order, social engineering and expenditures on war, not forgetting the operation of the government itself.

In modern day’s governments of different countries, the collected revenue also finances public services and the general welfare such as the health care systems, education systems, and pensions for the elderly, public transportation and unemployment benefits.

Different governments in different countries apply different kinds of taxes and tax rates. This is done with the global aim of distributing the tax burden among classes in the population or individuals who are involved in taxable activities such as businesses. It is also aimed at redistributing resources amongst classes in the population or individuals.

World tax rates

Economists argue that taxation distorts the market, resulting in an economic inefficacy. It is in light to this that they are seeking to identify a global kind of tax system that will minimize the market distortion.

There is nothing as difficult as taking a comparison of tax rates around the world as it tends to be subjective. Typically, the tax laws differ from country to country whereby in most countries the laws are extremely complex. This means that the tax incidence and tax burdens fall differently on different groups in either country or/and sub-national unit. By and large, the tax system of each nation mirrors the communal values or the values of the people in power to regulate the system.

Worldwide taxation

Some countries, such as the US, tax their residents and the country’s corporations on their worldwide income, in spite of whether they are currently US citizens or not. Other countries, in fact most countries in the world, use a residence-based taxation system to impose taxations.

Equally, in some countries like the US, if a non-citizen is involved in a business or trade, the profits of the business is subject to taxation of the country where the business or trade is being transacted. But generally, interest paid to non residents in various countries, is not usually subject to taxation.

Tags: check, Economics, finance, government, Income, law, market, revenue, tax, Taxation

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