Income Tax Definition
Summary
Income tax is a mandatory levy imposed by public authorities on income earned by individuals or entities. In employment contexts, income tax is typically calculated on taxable income derived from gross income under rules defined by national law. Income tax is a core component of public finance systems across Europe.
Main explanation
What is income tax
Income tax is a compulsory payment required by law on income received during a defined period.
- is established and governed by tax legislation
- is assessed on taxable income
- finances general public expenditure
Income tax and employment income
- calculated on wages or salaries
- withheld at source by employer
- transferred to authorities
Income tax structures
- progressive systems
- flat tax systems
- tax‑free allowances
Income tax and public finance
- public administration
- infrastructure
- education
- social services
Income tax in comparisons
- compare tax burdens
- understand net income differences
- assess labour‑market systems
What this page does not cover
- tax rates or brackets
- allowances or credits
- household taxation
- filing procedures
- tax optimisation
References