After hearing about the various kinds of taxes levied on people, you may ask what being black has got to do with tax; the same goes for withholding tax.
In this post, we will be talking about withholding tax and black tax, and other common taxes people pay in Nigeria and other parts of the world.
You may want to check out other posts we’ve covered on tax identification numbers and other essential information about tax evasion.
Withholding Tax
Withholding is a type of tax that is also referred to as retention tax. When someone mentions retention tax, they are also referring to withholding tax. It is a tax that is prepaid – meaning it is deducted at source from the income that is earned. It typically applies to salaries, wages, or bonuses, all of which are classified as employment income.
For non-employment income, it can either be interest, rent, dividends, or royalties.The purpose for withholding tax is so that the timely payment of tax is achieved; tax evasion is minimised, and the process of collecting tax is seamless.
Black Tax
As the name implies, black taxes are not levied on everyone as you are about to discover. Black tax is the financial burden that is placed on successful Black individuals, especially in South Africa, to support extended family members and communities due to historical economic disparities.
This type of tax is considered to be informal because it originated from cultural expectations, loyalty and responsibility, impacting personal finances, and socioeconomic mobility. Those considered to be successful in the black community take up education expenses, living costs, and healthcare for families.
As touching community responsibilities, they take up financial burdens related to financial assistance, business investments, and cultural events.
Effective Tax Rate
Effective Tax Rate, also known as ETR, is designed to measure the actual percentage of taxes paid on taxable income. This accounts for deductions, exemptions, and tax credits. Effective tax rate is meant to provide a realistic understanding of tax liability, which is different from statutory tax rates.
This method aims at helping both individuals and businesses in financial planning, assessing tax efficiency and the comparison of tax burdens across investments, regions or entities.
Inclusive TaxInclusive Tax is a type of taxation system where taxes are incorporated into the final price of goods or services, ensuring the consumer pays the total cost, including tax, upfront. Inclusive Tax is designed to simplify transactions that are transparent.
These types of taxes are common: Values Added Tax, Goods and Services Tax, and Sales Tax.
The merit of adopting this tax is the benefit it provides businesses by reducing administrative burdens and helping consumers in understanding total costs.
Now that we have discussed withholding tax and black tax, which other taxes do you often come across or hear more frequently? Let’s hear your thoughts in the comment section.
