What do you think?
Rate this book
Very Short Introductions #428
Taxation: A Very Short Introduction
Taxation is crucial to the functioning of the modern state. Tax revenues pay for public services - roads, the courts, defence, welfare assistance to the poor and elderly, and in many countries much of health care and education too. More than one third of national income in the industrialized (OECD) countries is on average taken in taxation. Taxes affect individuals in many ways. Taxes paid on income and spending directly reduce taxpayer disposable income, taxpayers face the hassle of tax returns and making payments, and they may be anxious about the possibility of investigation and enforcement action. People also adapt their activities in various ways to reduce the impact of taxation - putting money into tax-free savings accounts, or making shopping trips to other countries where taxes are lower.
Taxation is therefore central to politics and public debate. Politicians that make reckless campaign promises about taxation then have to live with the uncomfortable consequences if elected. Businesses lobby for tax breaks that they claim will create jobs and prosperity.
In this Very Short Introduction Stephen Smith shows how taxes have real effects on citizens and the economy that tax policy-makers have to balance. Although tax policy will always be a highly political issue, he argues that public decisions about taxation would be improved by a better understanding of the role of taxation, and of the nature and effects of different taxes.
ABOUT THE SERIES:
The Very Short Introductions series from Oxford University Press contains hundreds of titles in almost every subject area. These pocket-sized books are the perfect way to get ahead in a new subject quickly. Our expert authors combine facts, analysis, perspective, new ideas, and enthusiasm to make interesting and challenging topics highly readable.
Taxation is therefore central to politics and public debate. Politicians that make reckless campaign promises about taxation then have to live with the uncomfortable consequences if elected. Businesses lobby for tax breaks that they claim will create jobs and prosperity.
In this Very Short Introduction Stephen Smith shows how taxes have real effects on citizens and the economy that tax policy-makers have to balance. Although tax policy will always be a highly political issue, he argues that public decisions about taxation would be improved by a better understanding of the role of taxation, and of the nature and effects of different taxes.
ABOUT THE SERIES:
The Very Short Introductions series from Oxford University Press contains hundreds of titles in almost every subject area. These pocket-sized books are the perfect way to get ahead in a new subject quickly. Our expert authors combine facts, analysis, perspective, new ideas, and enthusiasm to make interesting and challenging topics highly readable.
160 pages, Paperback
First published April 23, 2015
28 people are currently reading
319 people want to read
About the author
Stephen Smith
4 booksStephen Smith is a Professor of Economics at University College London, and Executive Dean of the Faculty of Social and Historical Sciences.
Ratings & Reviews
Friends & Following
Create a free account to discover what your friends think of this book!
Community Reviews
Displaying 1 - 13 of 13 reviews
December 25, 2025
Great short introduction to the fascinating topic of taxation. I'm not sure how well this book works if you have never had any interest in the topic but it is quity basic level, still there were a few charts that had me scratching my head trying to grasp them. Overall, definitely one of the better AVSI-books.
April 19, 2017
This is another fine volume in Oxford's "A Very Short Introduction Series," a collection established more than two decades ago and now containing hundreds of volumes which make diverse topics accessible to non-specialists. At 131 pp., Taxation is shorter than most other volumes in the series, yet it packs a lot of information on the design and implementation of tax policies.
In very rough terms, taxes are about 1/4 of income in the US, 2/5 in the EU, and 1/3 in the UK. As late as the 19th century, taxes constituted less than 10% of the national income (7% in the US). Progressive taxes are generally preferred to regressive ones. However, even when the income tax is progressive, the overall tax burden can be regressive because of the many indirect taxes.
Between 1965 and 2011, income tax, as a fraction of total taxes collected, has remained fairly constant at about 1/4, whereas social-security and sales taxes have increased, while excise taxes have decreased, by more than 50% in each case. In absolute terms, taxes collected nearly quadrupled in constant dollars between 1965 to 2011. Share of tariffs in tax revenues has seen steady decline in most countries, as they participate in freer trade.
Taxation costs are of two types. One is the direct costs of tax collection infrastructure ($40 per head in the US; BP75 per head in the UK). Another is compliance costs for individuals and organizations. Just for income tax, each US citizen spends $250 on compliance (about BP60 in the UK).
Efficiency in tax collection is often at odds with the fairness of the tax burden. Income tax is easier to manage due to the relatively small number of origination points where withholding can take place and monitored. Consumption taxes are more difficult to manage due to the large number of transactions that are distributed throughout the economy. Consumption tax comes in the form of value-added tax (VAT) or sales tax. VAT can be 20% or more, whereas sales tax is generally less than 10%.
A diagram on p. 34 of the book helps us understand how the burden of a new tax is shared between producers and consumers, using the economic notions of supply and demand. A new tax will raise the prices, leading to a new equilibrium point in the market. The location of the new equilibrium point relative to the old one determines how the burden of the new tax will be divided between producers and consumers.
Raising income taxes has a complex effect on the supply side of the labor market. Some may choose to work less (or not at all), because the (added) income isn't worth it. Others may choose to work more to maintain the same level of after-tax income. Extensive research has shown that raising taxes tends to reduce the labor supply, with the effect being more pronounced for young people with children.
One way of assessing whether a new tax is advisable is to determine whose standard of living will fall when the tax is imposed; this isn't always easy to do. Because of complex interactions in the market, the burden of corporate profit taxes does not fall solely on the share-holders; new research shows that employees end up paying a big share.
Taxes, once imposed, tend to survive, even if the original needs for them disappear. This is because tax reform entail trade-offs and thus have political costs. No one likes taxes, but they are considered necessary evils. Try to imagine a situation where mandatory taxes were abolished and, instead, citizens made donations to their government. Before the establishment of money, taxes consisted of in-kind (crops) and labor (service in the army) contributions. There are tax records dating back to 3300 BCE in the cuneiform clay tablets from Mesopotamia (today's Iraq).
Cheating on taxes is a sensitive topic. Most people would not admit that they do cheat. Cheating is prevalent in many Asian countries, and much less so in Europe. A 2001 US study found the level of evasion for individuals to be around 9% and for corporations around 17% of the total revenue due.
There is an ongoing discussion about optimal taxation: a scheme that would raise the needed revenues but minimizes the excess burden on tax-payers. This is mostly a theoretical discussion, as the mechanisms to implement optimal taxation would be too complex and thus expensive. It is also unclear what should be taxed: wealth, income, or a combination thereof. There have been proposals for taxing earnings potential, rather than actual earnings, the latter being viewed as providing a disincentive for work by some. On the other hand, taxing earning potential might force a person to earn at a level equal or exceeding the taxed level, preventing people from living simpler lives.
Taxation is ultimately a political issue. The optimal tax scheme derived from equations and theorems may be unrealizable, given short-term political goals. Flat tax is more common in Eastern Europe, with the rate being around 25%. Russia has a flat tax rate of 13%. Politically, a flat tax rate is difficult to sell, because most swing voters are in the middle of income scale, whereas flat tax provides the highest benefits to the poor and to the very rich.
I highly recommend this valuable book to everyone who wants to learn about tax policies and their effects on businesses and individuals. I have summarized some of the key concepts presented in the book, but the book contains many more ideas and much more detail about what appears in this review.
In very rough terms, taxes are about 1/4 of income in the US, 2/5 in the EU, and 1/3 in the UK. As late as the 19th century, taxes constituted less than 10% of the national income (7% in the US). Progressive taxes are generally preferred to regressive ones. However, even when the income tax is progressive, the overall tax burden can be regressive because of the many indirect taxes.
Between 1965 and 2011, income tax, as a fraction of total taxes collected, has remained fairly constant at about 1/4, whereas social-security and sales taxes have increased, while excise taxes have decreased, by more than 50% in each case. In absolute terms, taxes collected nearly quadrupled in constant dollars between 1965 to 2011. Share of tariffs in tax revenues has seen steady decline in most countries, as they participate in freer trade.
Taxation costs are of two types. One is the direct costs of tax collection infrastructure ($40 per head in the US; BP75 per head in the UK). Another is compliance costs for individuals and organizations. Just for income tax, each US citizen spends $250 on compliance (about BP60 in the UK).
Efficiency in tax collection is often at odds with the fairness of the tax burden. Income tax is easier to manage due to the relatively small number of origination points where withholding can take place and monitored. Consumption taxes are more difficult to manage due to the large number of transactions that are distributed throughout the economy. Consumption tax comes in the form of value-added tax (VAT) or sales tax. VAT can be 20% or more, whereas sales tax is generally less than 10%.
A diagram on p. 34 of the book helps us understand how the burden of a new tax is shared between producers and consumers, using the economic notions of supply and demand. A new tax will raise the prices, leading to a new equilibrium point in the market. The location of the new equilibrium point relative to the old one determines how the burden of the new tax will be divided between producers and consumers.
Raising income taxes has a complex effect on the supply side of the labor market. Some may choose to work less (or not at all), because the (added) income isn't worth it. Others may choose to work more to maintain the same level of after-tax income. Extensive research has shown that raising taxes tends to reduce the labor supply, with the effect being more pronounced for young people with children.
One way of assessing whether a new tax is advisable is to determine whose standard of living will fall when the tax is imposed; this isn't always easy to do. Because of complex interactions in the market, the burden of corporate profit taxes does not fall solely on the share-holders; new research shows that employees end up paying a big share.
Taxes, once imposed, tend to survive, even if the original needs for them disappear. This is because tax reform entail trade-offs and thus have political costs. No one likes taxes, but they are considered necessary evils. Try to imagine a situation where mandatory taxes were abolished and, instead, citizens made donations to their government. Before the establishment of money, taxes consisted of in-kind (crops) and labor (service in the army) contributions. There are tax records dating back to 3300 BCE in the cuneiform clay tablets from Mesopotamia (today's Iraq).
Cheating on taxes is a sensitive topic. Most people would not admit that they do cheat. Cheating is prevalent in many Asian countries, and much less so in Europe. A 2001 US study found the level of evasion for individuals to be around 9% and for corporations around 17% of the total revenue due.
There is an ongoing discussion about optimal taxation: a scheme that would raise the needed revenues but minimizes the excess burden on tax-payers. This is mostly a theoretical discussion, as the mechanisms to implement optimal taxation would be too complex and thus expensive. It is also unclear what should be taxed: wealth, income, or a combination thereof. There have been proposals for taxing earnings potential, rather than actual earnings, the latter being viewed as providing a disincentive for work by some. On the other hand, taxing earning potential might force a person to earn at a level equal or exceeding the taxed level, preventing people from living simpler lives.
Taxation is ultimately a political issue. The optimal tax scheme derived from equations and theorems may be unrealizable, given short-term political goals. Flat tax is more common in Eastern Europe, with the rate being around 25%. Russia has a flat tax rate of 13%. Politically, a flat tax rate is difficult to sell, because most swing voters are in the middle of income scale, whereas flat tax provides the highest benefits to the poor and to the very rich.
I highly recommend this valuable book to everyone who wants to learn about tax policies and their effects on businesses and individuals. I have summarized some of the key concepts presented in the book, but the book contains many more ideas and much more detail about what appears in this review.
July 7, 2016
A solid introduction.
Chapter 1: Why do we have taxes?
Chapter 2: The structure of taxation
Chapter 3: Who bears the tax burden?
Chapter 4: Taxation and the economy
Chapter 5: Tax evasion and enforcement
Chapter 6: Issues in tax policy
Chapter 1: Why do we have taxes?
Chapter 2: The structure of taxation
Chapter 3: Who bears the tax burden?
Chapter 4: Taxation and the economy
Chapter 5: Tax evasion and enforcement
Chapter 6: Issues in tax policy
August 1, 2015
A most lucid introduction..
October 23, 2020
This book is part of Oxford University Press’ Very Short Introductions series. It comprises six chapters discussing the reasons why we still have taxes, the structure of modern taxation, those who bear the tax burden, taxation and the economy, tax evasion and tax enforcement, and the current issues in tax policy. I find the book readily comprehensible for the average reader.
I personally believe that the better we understand taxation, the better we make (political) decisions. Almost all aspects of our life are affected: governments utilise taxes as their primary fiscal policy tool, corporations take them into consideration when doing business, political parties bring them to appeal the general electorate, and environmentalists advocate using them as a strategic instrument to reduce the costs and consequences of our fossil-fuelled economy. As cliché as it may sound, two things we cannot avoid are indeed death and taxes.
As for tax authorities, it is critical to maintain an acceptable balance between raising tax revenues on a fair and efficient basis and preventing it from disturbing the economy as well as incurring public resistance. Adam Smith, as cited in the book, set out four principles: 1) equity of contributions, 2) certainty of tax liabilities, 3) convenience of payment, and 4) minimisation of costs. It is of course easier said than done, particularly when the principles conflict during the implementation.
Several specific topics are presented conscientiously: the story of corrupt tax-collectors in the Roman Republic (the “publicani”), the formal and effective incidence of a tax, progressive and regressive tax rate, tax burden distribution across households, economic costs of a tax system brings, and the radical simplification of the tax system. Two themes that really intrigue me are the difficulties involved in abolishing low-rate VAT on food and other necessities (although the most substantial gains would accrue to the rich) and the paradox of modern tax-sovereignty (via international coordination and harmonisation).
This book makes a solid “introduction” to taxation. Laypeople would love it, I think. But experts and professionals who favour thorough analyses and detailed discussions? I don’t think so.
---
My favourite words and phrases from the book (in order of appearance):
1. Iniquities
2. Hauliers
3. Sinews
4. Angst
5. Venal
6. Tart
7. Vitriol
8. Scathing
9. Compulsory
10. Exacted
11. Doubtless
12. Arbitrary
13. Confiscation
14. Exert
15. Cuneiform
16. Tithes
17. In kind
18. Waxed and waned
19. Undertakings
20. Impetus
21. Buoyancy
22. Leviathan
23. Restraints
24. Luncheon
25. Tranches
26. Till
27. Bootleg
28. Footloose
29. Idiosyncrasies
30. Kaleidoscopic
31. Lavish
32. Prudently
33. Windfall
34. Better off
35. Borne
36. Underpinning
37. Quixotic
38. Hinges
39. Confers
40. Capricious
41. Decile
42. Thereafter
43. Patchy
44. Subtle
45. Industrialised
46. Disamenity
47. Forgone
48. Schedule
49. Impeccable
50. Turmoil
51. Tedium
52. Drudgery
53. Conceivable
54. Comprise
55. Disincentive
56. Redistributive
57. Perspectives
58. Indignation
59. Fortnight
60. Succumbs
61. Prompting
62. Disaffected
63. Imprecise
64. For the time being
65. Contrived
66. Weaponry
67. Jaundiced
68. Misperceive
69. Discrepancies
70. Carousel
71. Follow suit
72. Minefield
73. Unseated
74. Treacherous
75. Aggravate
76. Perquisite
77. Produce
78. Forfeitures
79. Odious
80. Vexation
81. Far cry
82. Market-orientated
83. Buoyant
84. Chagrin
85. Stark
86. Unpromising
87. Abatement
88. Benign
I personally believe that the better we understand taxation, the better we make (political) decisions. Almost all aspects of our life are affected: governments utilise taxes as their primary fiscal policy tool, corporations take them into consideration when doing business, political parties bring them to appeal the general electorate, and environmentalists advocate using them as a strategic instrument to reduce the costs and consequences of our fossil-fuelled economy. As cliché as it may sound, two things we cannot avoid are indeed death and taxes.
As for tax authorities, it is critical to maintain an acceptable balance between raising tax revenues on a fair and efficient basis and preventing it from disturbing the economy as well as incurring public resistance. Adam Smith, as cited in the book, set out four principles: 1) equity of contributions, 2) certainty of tax liabilities, 3) convenience of payment, and 4) minimisation of costs. It is of course easier said than done, particularly when the principles conflict during the implementation.
Several specific topics are presented conscientiously: the story of corrupt tax-collectors in the Roman Republic (the “publicani”), the formal and effective incidence of a tax, progressive and regressive tax rate, tax burden distribution across households, economic costs of a tax system brings, and the radical simplification of the tax system. Two themes that really intrigue me are the difficulties involved in abolishing low-rate VAT on food and other necessities (although the most substantial gains would accrue to the rich) and the paradox of modern tax-sovereignty (via international coordination and harmonisation).
This book makes a solid “introduction” to taxation. Laypeople would love it, I think. But experts and professionals who favour thorough analyses and detailed discussions? I don’t think so.
---
My favourite words and phrases from the book (in order of appearance):
1. Iniquities
2. Hauliers
3. Sinews
4. Angst
5. Venal
6. Tart
7. Vitriol
8. Scathing
9. Compulsory
10. Exacted
11. Doubtless
12. Arbitrary
13. Confiscation
14. Exert
15. Cuneiform
16. Tithes
17. In kind
18. Waxed and waned
19. Undertakings
20. Impetus
21. Buoyancy
22. Leviathan
23. Restraints
24. Luncheon
25. Tranches
26. Till
27. Bootleg
28. Footloose
29. Idiosyncrasies
30. Kaleidoscopic
31. Lavish
32. Prudently
33. Windfall
34. Better off
35. Borne
36. Underpinning
37. Quixotic
38. Hinges
39. Confers
40. Capricious
41. Decile
42. Thereafter
43. Patchy
44. Subtle
45. Industrialised
46. Disamenity
47. Forgone
48. Schedule
49. Impeccable
50. Turmoil
51. Tedium
52. Drudgery
53. Conceivable
54. Comprise
55. Disincentive
56. Redistributive
57. Perspectives
58. Indignation
59. Fortnight
60. Succumbs
61. Prompting
62. Disaffected
63. Imprecise
64. For the time being
65. Contrived
66. Weaponry
67. Jaundiced
68. Misperceive
69. Discrepancies
70. Carousel
71. Follow suit
72. Minefield
73. Unseated
74. Treacherous
75. Aggravate
76. Perquisite
77. Produce
78. Forfeitures
79. Odious
80. Vexation
81. Far cry
82. Market-orientated
83. Buoyant
84. Chagrin
85. Stark
86. Unpromising
87. Abatement
88. Benign
October 25, 2021
Pretty decent and well written read on taxation. Smith discusses the history of tax as well as casting predictions on the future of tax, which was what I was looking for. I was also looking for more information regarding income tax, and the writer provided ample information regarding such a tax, but failed to explain why such a tax was necessary.
Also - if you include a graph, it would be good if you explained it further. A graph in the book shows that the poor are more affected by indirect tax than the rich. Which indirect taxes? Why? These questions remained unanswered, which is a shame. Overall quite rad.
Also - if you include a graph, it would be good if you explained it further. A graph in the book shows that the poor are more affected by indirect tax than the rich. Which indirect taxes? Why? These questions remained unanswered, which is a shame. Overall quite rad.
January 16, 2021
Short yet informative, this book explains all about taxation in the most direct way to inform the reader topics ranging from the introduction, the problems with taxes, and why it is a very hard thing to control or to maintain even by the best government. Although at some part, readers have to take a step back and understand very slowly (especially those without economics knowledge in their background), this book is still readable for most people, and I think people should try read it especially those who are interested with Taxation in general.
July 15, 2024
The British Economist Stephen Smith published Taxation: A Very Short Introduction in 2015. The book has illustrations and an index. The illustrations include graphs and tables. The book has a section entitled “further reading” (Smith 125-127). The book has a handy glossary of terms related to taxation. The first chapter defines taxation and has a short history of taxation. The book has an introduction that introduces specific ideas for studying taxation. Each chapter starts with a quotation about taxation. The first chapter also includes a section that presents the relationship between taxation and the size of the government. Chapter 2 concerns “the structure of taxation” (Smith 12-30). Chapter 3 is entitled “who bears the tax burden” (Smith 31-47). Chapter 4 discusses “taxation and the economy” (Smith 48-74). Chapter 5 discusses “tax evasion and enforcement” (Smith 75-96). The last chapter is on issues in contemporary tax policy. The book focuses on the countries' taxation policies in the Organization for Economic Cooperation and Development (OECD) (Smith 1). The OECD is based in Paris, France, and has thirty-eight member countries as of 2024. The OECD members are countries with industrialized economies (Smith 1). I found Taxation by Stephen Smith a valuable and thoughtful introduction to taxation.
August 20, 2017
great quote: "Why do so many people pay their taxes, when the risks of noncompliance are so small?"
January 13, 2021
Prima introductie zoals altijd. Helder, overzichtelijk en toch met enkele interessantie inzichten.
May 29, 2016
Professor Stephen Smith gives excellent insight into the world of taxation. Chapter 1 begins with a brief history of taxation and why we have it. Chapter 2 discusses the structure of the tax system across different OECD countries, and the structure of the tax system across corporations and income. Chapter 3 discusses who bears the tax burden, and an argument for why taxing corporate profits, in the end, only hurts the employees and their wages. Chapter 4 discusses taxation and the economy, and the concepts covered include efficiency, equity, and distortion. Chapter 5 is about tax evasion - what causes people to evade taxes, studies on tax evasion across countries, and enforcement. The book finishes with insight from Adam Smith and contemporary sources as to what makes a good tax policy and how such a policy can be achieved. Overall, it's a short but detailed book into the world of taxation that is well written and full of great insight.
December 25, 2019
Great read
Really nice starting point for those curious about taxes.
I truly think you will enjoy it as much as I did.
Really nice starting point for those curious about taxes.
I truly think you will enjoy it as much as I did.
Displaying 1 - 13 of 13 reviews