Short definition: Taxation is the process by which governments impose and collect compulsory levies on individuals, businesses, and other entities to generate revenue for public spending.
Explanation: Taxes are a primary source of funding for government activities and programs, such as infrastructure development, education, healthcare, and defense. They are levied on various forms of income, wealth, and consumption, including income taxes, property taxes, sales taxes, and corporate taxes.
Example: Individuals pay income tax on their earnings, businesses pay corporate tax on their profits, and consumers pay sales tax on their purchases.
Additional information (optional): Tax systems vary across countries and can be progressive (tax rates increase as income increases), regressive (tax rates decrease as income increases), or proportional (tax rates remain constant regardless of income). Taxation policies can be used to achieve various economic and social objectives, such as redistributing wealth, encouraging investment, or discouraging certain activities.