:: wikimiki.org ::

Sales Tax

Sales tax

A sales tax is a tax on consumption. It is normally a certain percentage that is added onto the price of a good or service that is purchased. Ideally a sales tax is charged exactly once on any one item. A conventional or retail sales tax attempts to achieve this by charging the tax only on retail transactions, not on businesses buying raw materials for production or finished goods for resale. This prevents so-called tax "cascading," in which an item is taxed more than once as it makes its way from production to final retail sale. A related type of tax is the value-added tax, or VAT. It is a system in which all businesses remit taxes on their sales, but they are also refunded the amount of VAT remitted by their suppliers. In addition to avoiding cascading, under VAT there is no need for government to determine which sales are taxable and which are not, since all sales--retail and wholesale--are taxed. Most countries in the world have sales taxes or value-added taxes at either the national or local level. Countries in western Europe, especially in Scandinavia have some of the world's highest valued-added taxes. Denmark, Sweden and Hungary have the highest VATs at 25% although reduced rates are sometimes used. In some countries, there are multiple levels of government which each impose a sales tax. For example, sales tax in Chicago is 9%, consisting of 5% state, 2.25% city, 0.75% county and 1% regional transportation authority and that in Baton Rouge, Louisiana is 9%, consisting of 4% state and 5% local rate [http://brgov.com/dept/finance/newrates.htm 1]. Sales taxes are generally regressive, that is, poorer people tend to pay a greater percentage of their income in sales tax than richer people, because they tend to spend a far higher percentage of their income. In some locations, items such as food, clothing, or prescription drugs are exempt from sales taxes ostensibly to alleviate the burden on the poor. Some of these exemptions (such as exemptions for clothing or prescription drugs) actually may make the tax more regressive, since poorer individuals may spend a smaller percentage of their incomes on these items than do richer individuals. Since the 1990s, the idea of replacing the income tax with a national sales tax has been floated in the United States; many of the actual proposals would include giving each household an annual rebate, paid in monthly installments, equivalent to the percentage of the tax (which varies from 15% to 23% in most cases) multiplied by the poverty level based on the number of persons in the household, in an effort to reduce the sales tax's inherent regressivity. Chances of such a change ever being adopted are considered remote by most American political observers.

Tax

A tax is a compulsory charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (e.g., tribes, secessionist movements or revolutionary movements). Taxes could also be imposed by a subnational entity. Taxes may be part of a direct tax or indirect tax, and may be paid in money or as corvée labor. In modern, capitalist taxation systems, taxes are levied in money, but in-kind and corvée taxation are characteristic of traditional or pre-capitalist states and their functional equivalents. The means of taxation, and the uses to which the funds raised through taxation should be put, are a matter of hot dispute in politics and economics, so discussions of taxation are frequently tendentious. Public finance is the field of political science / economics that deals with taxation.

A history of taxation

Political authority has been used to raise capital throughout history. In many pre-monetary societies, such as the Incan empire, taxes were owed in labor (see Mita). Taxation in labour was the basis of the Feudal system in medieval Europe. King Solomon of the Old Testament pointed to the need for taxes to be applied for civil purposes (1 Kings 4:7; 9:15; 12:4), and these amounts were increased during times of foreign occupation. In more sophisticated economies such as the Roman Empire, tax farming developed, as the central powers could not practically enforce their tax policy across a wide realm. The tax farmers were obligated to raise large sums for the government, but were allowed to keep whatever else they raised. Many Christians have understood the New Testament to support the payment of taxes, through Jesus's words "Render unto Caesar the things that are Caesar's". It is even recognized as a duty whether as a "telos" on merchandise or travelers ([http://www.biblegateway.net/passage/?search=Matthew%2017:25;&version=31 Matthew 17:25]), an annual "phoros" on property tax ([http://www.biblegateway.net/passage/?search=Luke%2020:22;23:2;&version=31 Luke 20:22;23:2]), a "kensos" or poll tax ([http://www.biblegateway.net/passage/?search=Matthew%2022:17;&version=31 Matthew 22:17], [http://www.biblegateway.net/passage/?search=Mark%2012:14;&version=31 Mark 12:14]), or the tribute money of a temple-tax ([http://www.biblegateway.net/passage/?search=Matthew%2017:24-27;&version=31 Matthew 17:24-27]). Other Christians, such as Christian anarchists, hold a contrary interpretation. There were certain times in the Middle Ages where the governments did not explicitly tax, since they were self supporting, owning their own land and creating their own products. The appearance of doing without taxes was however illusory, since the government's (usually the Crown's) independent income sources depended on labour enforced under the feudal system, which is a tax exacted in kind. Many taxes were originally introduced to fund wars and are still in place today, such as those raised by the American government during the American Civil War (1861-1865) and the telephone tax instigated at the start of World War I (War Tax Revenue Act of 1914). Income tax was first introduced into Britain in 1798 to pay for weapons and equipment in preparation for the Napoleonic wars and into Canada in 1917 as a "temporary" tax under the Income War Tax Act to cover government expenses resulting from World War I. The current income tax in America was set up by Woodrow Wilson in 1913. It was called The Federal Income Tax and was deducted from incomes at rates varying from 1-7%. But, since then, the American Tax Code has been modified and new taxes have been added, especially over the World War I and II periods. Since World War I, the American Tax Code has increased in size four-fold.

Purposes and effects of taxation

Funds provided by taxation have been used by states and their functional equivalents throughout history to carry out the functions such as:
- military defense,
- enforcement of law and public order,
- protection of property,
- redistribution of wealth,
- economic infrastructure — roads, legal tender, enforcement of contracts, etc.,
- public works,
- the operation of government itself. Most modern governments also use taxes to fund welfare and public services, such as:
- education systems,
- healthcare systems,
- pensions for the elderly,
- unemployment benefits
- energy, water and waste management systems,
- public transportation. Colonial states and moderning states have also used cash taxes to draw or force reluctant subsistence producers into cash economies. Governments use different kind of taxes and vary the tax rates:
- to distribute the tax burden between individuals or classes of the population involved in taxable activities, such as business,
- to redistribute resources between individuals or classes in the population. Historically, the nobility were supported by taxes on the poor; modern social security systems are intended to support the poor, the disabled or the retired by taxes on those who are still working,
- to influence the macroeconomic performance of the economy (the government's strategy for doing this is called its fiscal policy) (see also tax exemption),
- to modify patterns of consumption or employment within an economy, by making some classes of transaction more or less attractive. The resource taken from the public through taxation is always somewhat greater than the amount which can be used by the government. The difference is called compliance cost, and includes for example the labour cost and other expenses incurred in complying with tax laws and rules. The collection of a tax in order to spend it on a specified purpose, for example collecting a tax on alcohol to pay directly for alcoholism rehabilitation centres, is called hypothecation. This practice is often disliked by finance ministers, since it reduces their freedom of action. Some economic theorists consider the concept to be intellectually dishonest since in reality money is fungible. Furthermore, it often happens that taxes or excises initially levied to fund some specific government programs are then later diverted to the government general fund. In some cases, such taxes are collected in fundamentally inefficient ways, for example highway tolls. Some economists, especially neo-classical economists argue that all taxation distorts the market and results in economic inefficiency. They have therefore sought to identify the kind of tax system that would minimise this distortion. A theory is that the most economically neutral tax is a tax on land. A government's primary duty is to maintain and defend title to land, and therefore it should collect most of its revenues for this unique service. Since governments also resolve commercial disputes, especially in countries with common law, this doctrine is often used to justify a sales tax or value added tax. Others (e.g. libertarians) argue that most or all forms of taxes are immoral due to their involuntary (and therefore eventually coercive/violent) nature. The most extreme anti-tax view is anarcho-capitalism, in which the provision of all social services should be a matter of voluntary private contracts.

Tax rates

Taxes are most often levied as a percentage, called the tax rate, of a certain value, the tax base (how much income and assets one has, earns, spends, inherits, etcetera). An ad valorem tax is one where the tax base is the value of a good, service, or property. Sales taxes, tariffs, property taxes, inheritance taxes, and value added taxes are different types of ad valorem tax. An ad valorem tax is typically imposed at the time of a transaction (sales tax or value added tax (VAT)) but it may be imposed on an annual basis (property tax) or in connection with another significant event (inheritance tax or tariffs). An alternative to ad valorem taxation is an excise tax, where the tax base is the quantity of something, regardless of its price: for example, in the United Kingdom, a tax is collected on the sale of alcoholic drinks that is calculated by volume and beverage type rather than the price of the drink. An important distinction when talking about tax rates is to distinguish between the marginal rate and the average rate. The average rate is the total tax paid divided by the total amount the tax is paid on, while the marginal rate is the rate paid on the next dollar of income earned. In a “progressive” tax system, these can be very different. For example, if income is taxed on a formula of 5% from $0 up to $49,999, 10% from $50,000 to $99,999, and 15% over $100,000, a taxpayer with income of $175,000 would pay a total of $18,750: :((0.05
- 50,000) + (0.10
- 50,000) + (0.15
- 75,000)) :=18,750 His average rate would be 10.7%: :(18,750/175,000) := 0.107 However, his marginal rate would be 15%.

“Flat”, “Progressive”, and “Regressive” taxation

An important feature of tax systems is whether they are "flat" (the total tax paid is constant over all income levels), “proportional” (the tax as a percentage of income is constant over all income levels), “regressive” (the tax as a percentage of income falls as income rises), or “progressive” (the tax as a percentage of income rises as income rises). Progressive taxes reduce the tax incidence of people with smaller incomes, as they shift the incidence disproportionately to those with higher incomes. In the United States, the popular press uses the term "flat tax" to refer to what is, technically, a proportional tax, and "poll tax" to refer to what is, technically, a flat tax.

Direct and indirect taxation

Taxes are sometimes referred to as direct or indirect. The meaning of these terms can vary in different contexts, which can sometimes lead to confusion. In economics, direct taxes refer to those taxes that are collected from the people or organizations on whom they are ostensibly imposed. For example, income taxes are collected from the person who earns the income. By contrast, indirect taxes are collected from someone other than the person ostensibly responsible for paying the taxes. From whom a tax is collected is a matter of law. However, who pays the tax is determined by the market place and is found by comparing the price of the good (including tax) after the tax is imposed to the price of the good before the tax was imposed. For example, suppose the price of gas in the U.S., without taxes, were $2.00 per gallon. Suppose the U.S. government imposes a tax of $0.50 per gallon on the gas. Forces of demand and supply will determine how that $0.50 tax burden is distributed among the buyers and sellers. For example, it is possible that the price of gas, after the tax, might be $2.40. In such a case, buyers would be paying $0.40 of the tax while the sellers would be paying $0.10 of the tax. In law, the terms may have different meanings. In US constitutional law, for instance, direct taxes refer to poll taxes and property taxes, which are based on simple existence or ownership. Indirect taxes are imposed on rights, privileges, and activities. Thus, a tax on the sale of property would be considered an indirect tax, whereas the tax on simply owning the property itself would be a direct tax. The distinction can be subtle, but it is important under US law, since the United States Constitution formerly required that direct taxes be apportioned according to population. That is, if one state had twice the population of another state, then the direct tax revenue from that state must be exactly twice that from the other state. In 1895, the US Supreme Court interpreted the income tax as a direct tax when applied to income from property, and struck down the tax as a result. The federal government then had no income tax until the Sixteenth Amendment was ratified, which removed the apportionment requirement for income taxes.

Economics of taxation

Image:TaxGraph1.jpg
Figure 1: Equilibrium

Figure 1 indicates a good without any government interference. This good could represent anything from apples to zippers. At this equilibrium quantity Q1 of the good are sold at price P1. The consumer and producer surplus are both high.

Image:TaxGraph2.jpg
Figure 2: With a tax

Figure 2 shows the introduction of a very simple tax. The tax charges a flat fee whenever a consumer wishes to purchase the good. The price thus rises to P2, and since fewer consumers wish to purchase the good at the higher price, the quantity produced falls to Q2. The government receives the amount of the tax for each unit sold, and this amounts to the region shown in grey. This is the amount of revenue the government receives for this tax. Note that in this situation the price of the good to consumers only increases by half the amount of the tax, the other half of the tax is borne by the producer. Thus both consumer and producer surpluses shrink by equal amounts. For many goods this is not the case. Who bears the cost of the tax is determined by the elasticity of the good. For inelastic goods like cigarettes, and gasoline almost all of the tax is paid by the consumer.

Image:TaxGraph3.jpg
Figure 3: Net Societal Loss

The tax is not a simple transfer of wealth from producers and consumers to government. A permanent loss of surplus occurs, shown in orange. This loss is often called dead weight loss which is a permanent loss to sociey as if some of the goods (Q1 to Q2) were destroyed. However, because this model greatly simplifies the economics of taxation, governments must weigh many other factors when choosing a tax system. The size of the dead weight loss usually increases exponentially with regards to the size of the tax meaning a broad small tax (sales tax) would normally have less negative impact than a narrow large tax (taxing a particular good heavily).

Types of taxes

Income tax

Income tax is commonly a progressive tax because the tax rate increases with increasing income. For this reason, it is generally advocated by those who think that taxation should be borne more by the rich than by the poor, even to the point of serving as a form of social redistribution. Some critics characterize this tax as a form of punishment for economic productivity. Other critics charge that income taxation is inherently socially intrusive because enforcement requires the government to collect large amounts of information about business and personal affairs, much of which is considered proprietary and confidential. The crucial invention permitting the reliable collection of high income taxes was direct withholding of taxes from payrolls by employers; this works because most people in modern societies are salaried workers. This reduces the perceived burden of the tax, because employees never handle the money. Direct withholding also discourages cheating, because it requires the collaboration of employers, and as there are fewer employers than employees, the government's enforcement efforts can be deployed more effectively. However, direct withdrawal also has some drawbacks: it puts part of the burden of processing taxes on the employer, and it also complicates matters when the employee is in a situation where he or she should pay significantly less or more than what is expected from its salary (because of tax-deductible expenses, or side revenues). Direct withholding is the method of collection of choice in most countries implementing income taxes, with the exception of France, where direct withholding is periodically discussed, but has so far not been implemented. Where income tax is not collected at source, it may become easier to cheat by lying about one's affairs. The government may then require that employers report the amounts they pay to employees. Income tax, in addition to income, generally takes into account a variety of factors. Certain expenses, such as work-related expenses, donations to charities etc..., may be tax-deductible: that is, they are subtracted from the taxable revenue. Investments in some impoverished areas or industrial sectors may be encouraged through tax breaks (reduced rates). Donations to charities may be partly subtracted from the tax, in an original form of subsidy. Because of various exemptions, rebates etc..., income tax codes tend to be complicated. In some countries such as the United States, individuals often hire the service of a tax accountant so as to find the best way to reduce their tax. Income tax fraud is a problem in most, if not all, countries implementing an income tax. Either one fails to declare income, or declares nonexistent expenses. Failure to declare income is especially easy for non-salaried work, especially those paid in cash. Tax enforcement authorities fight tax fraud using various methods, nowadays with the help of computer databases. They may, for instance, look for discrepancies between declared revenue and expenses along time. Tax enforcement authorities then target individuals for a tax audit – a more or less detailed review of the income and tax-deductible expenses of the individual. Income tax may be collected from legal entities (e.g., companies) as well as natural persons (individuals), although, in some cases, the income tax on legal entities is levied on a slightly different basis than the income tax on individuals and may be called, in the case of income tax on companies, a corporation tax or a corporate income tax. :See also: Negative income tax.

Emergency tax

In the UK, emergency tax is a special tax code used by employers when the tax code of an employee is unknown. A person with this code may pay excessive tax until their true tax code is issued by the Inland Revenue. If excessive tax is paid, this will be refunded to the person by the Inland Revenue.

Retirement tax

Some countries with social security systems, which provide income to retired workers, fund those systems with specific dedicated taxes. These often differ from comprehensive income taxes in that they are levied only on specific sources of income, generally wages and salary (in which case they are called payroll taxes). A further difference is that the total amount of the taxes paid by or on behalf of a worker is typically considered in the calculation of the retirement benefits to which that worker is entitled. Examples of retirement taxes include the FICA tax, a payroll tax that is collected from employers and employees in the United States to fund the country's Social Security system; and the National Insurance Contributions (NICs) collected from employers and employees in the United Kingdom to fund the country's national insurance system. These taxes are sometimes regressive in their immediate effect. For example, in the United States, each worker, whatever his or her income, pays at the same rate up to a specified cap, but income over the cap is not taxed. A further regressive feature is that such taxes often exclude investment earnings and other forms of income that are more likely to be received by the wealthy. The regressive effect is somewhat offset, however, by the eventual benefit payments, which typically replace a higher percentage of a lower-paid worker's pre-retirement income.

Capital gains tax

A capital gain tax is the tax levied of the profit realised upon the sale of an asset. In many cases, the amount of a capital gain is treated as income and subject to the marginal rate of income tax. If such a tax is levied on inherited property then it can act as a de facto probate or inheritance tax.

Corporation tax

Corporation tax is a tax on corporate earnings (and often includes capital gains) of a company. Earnings are generally considered gross revenue less expenses. However, corporate expenses that relate to capital expenditures are rarely deducted in full (such as the entire cost of a company truck) and are often deducted over the useful life of the asset purchase. Generally, industrialized countries also use a regressive rate of tax upon corporate income. See also: excess profits tax

Poll tax

A poll tax, also called a per capita tax, or capitation tax, is a tax that levies a set amount per individual. The earliest tax mentioned in the Bible of a half-shekel per annum from each adult Jew (Ex. 30:11-16) was a form of poll tax. Poll taxes are regressive, since they take the same amount of money (and hence, a higher proportion of income) for poorer individuals as for richer individuals. Poll taxes are difficult to cheat.

Excises

Unlike an ad valorem tax, an excise is not a function of the value the product being taxed. Excise taxes are based on the quantity, not the value, of product purchased. For example, in the United States, the Federal government imposes an excise tax of 18.4 cents per US gallon (4.86 ¢/L) of gasoline, while state governments levy an additional 8 to 28 cents per US gallon.

Purposes and effects of excises

Excises on particular commodities are frequently hypothecated. For example, a fuel excise is often used to pay for public transportation, especially roads and bridges and for the protection of the environment. A special form of hypothecation arises where an excise is used to compensate a party to a transaction for alleged uncontrollable abuse: for example, a blank media tax is a tax on recordable media such as CD-Rs, whose proceeds are typically allocated to copyright holders. Critics charge that such taxes tax blindly those who make legitimate and illegitimate usages of the products; for instance, a person or corporation using CD-R's for data archival should not have to subsidize the producers of popular music. Excises (or exemptions from them) are also used to modify consumption patterns. For example, a high alcohol excise is used to discourage alcohol consumption, relative to other goods. This may be combined with hypothecation if the proceeds are then used to pay for the costs of treating illness caused by alcohol abuse. Similar taxes may exist on tobacco, pornography, etc..., and they may be collectively referred to as sin taxes. A carbon tax is a tax on the consumption of carbon-based non-renewable fuels, such as petrol, diesel-fuel, jet fuels and natural gas. The object is to reduce the release of carbon into the atmosphere. In the UK, vehicle excise duty is an annual tax on vehicle ownership.

Sales tax

Sales taxes are a form of excise levied when a commodity is sold to its final consumer. They are generally held to discourage retail sales. The question of whether they are generally progressive or regressive is a subject of much current debate. People with higher incomes spend a lower proportion of them, so a flat-rate sales tax will tend to be regressive. It is therefore common to exempt food, utilities and other necessities from sales taxes, since poor people spend a higher proportion of their incomes on these commodities, so such exemptions would make the tax more progressive. The classic way of cheating on sales tax is to ask a merchant or service provider for a cash discount. The merchant pockets the cash and writes off the merchandise to shrinkage and the state fails to get the tax.

Tariffs

An import or export tariff (also called customs duty or impost) is a charge for the movement of goods through a political border. Tariffs discourage trade, and they may be used by governments to protect domestic industries. A proportion of tariff revenues is often hypothecated to pay government to maintain a navy or border police. The classic way of cheating a tariff is smuggling.

Value added tax

A value added tax (sometimes called a goods and services tax - GST, as in Australia and Canada) applies the equivalent of a sales tax to every operation that creates value. To give an example, sheet steel is imported by a machine manufacturer. That manufacturer will pay the VAT on the purchase price, remitting that amount to the government. The manufacturer will then transform the steel into a machine, selling the machine for a higher price to a wholesale distributor. The manufacturer will collect the VAT on the higher price, but will remit to the government only the excess related to the "value added" (the price over the cost of the sheet steel). The wholesale distributor will then continue the process, charging the retail distributor the VAT on the entire price to the retailer, but remitting only the amount related to the distribution markup to the government. The last VAT amount is paid by the eventual retail customer who cannot recover any of the previously paid VAT. Economic theorists have argued that this minimises the market distortion resulting from the tax, compared to a sales tax. However, VAT is held by some to discourage production. VAT was historically used when a sales tax or excise tax was uncollectible. For example, a 30% sales tax is so often cheated that most of the retail economy will go off the books. By collecting the tax at each production level, and requiring the previous production level to collect the next level tax in order to recover the VAT previously paid by that production level, the theory is that the entire economy helps in the enforcement. In reality, forged invoices and the like demonstrate that tax evaders will always attempt to cheat the system.

Property taxes

A property tax is usually levied on the value of property owned, usually real estate. Property taxes may be charged on a recurrent basis, or upon a certain event. A common type of property tax is an annual charge on the ownership of real estate, where the tax base is the supposed value of the property. For a period of over 150 years from 1695 a window tax was levied in England, with the result that you can still see listed buildings with windows bricked up [http://www.absentiacerebra.com/Trips/UK/Pages/Image31.html] in order to save their owner's money. A similar tax existed in France, with similar results. The two most common type of event driven property taxes are stamp duty, charged upon change of ownership, and inheritance tax, which is imposed in many countries on the estates of the deceased. In contrast with a tax on real estate, a land value tax is levied only on the unimproved value of the land. When real estate is held by a higher government unit or some other entity not subject to taxation by the local government, the taxing authority may receive a payment in lieu of taxes to compensate it for some or all of the foregone tax revenue.

Transfer taxes

Historically, in many countries, a contract needed to have a stamp affixed to make it valid. The charge for the stamp was either a fixed amount or a percentage of the value of the transaction. In most countries the stamp has been abolished but stamp duty remains. Stamp duty is levied in the UK on the purchase of shares and securities, the issue of bearer instruments, and certain partnership transactions. Its modern derivatives, stamp duty reserve tax and stamp duty land tax, are respectively charged on transactions involving securities and land. Stamp duty has the effect of discouraging speculative purchases of assets by decreasing liquidity. Taxes on currency transactions are known as Tobin taxes. See also: transfer tax, stamp duty

Inheritance tax

Some believe that inheritance taxes do not have any harmful effect on the economy and may even be beneficial as they encourage consumer spending by the elderly. However, they are also believed to discourage productivity and to disrupt the continuity of family-owned businesses. See also: allodial, death tax, estate tax, Pigovian tax

Wealth (net worth) tax

Main article: wealth (net worth) tax Some countries' governments will require declaration of the tax payers' balance sheet (assets and liabilities), and from that exact a tax on net worth (assets minus liabilities), as a percentage of the net worth, or a percentage of the net worth exceeding a certain level. The tax is in place for both "natural" and in some cases legal "persons".

Personal property tax

In many jurisdictions (including many American states), there is a general tax levied periodically on residents who own personal property within the jurisdiction. Vehicle and boat registration fees are subsets of this kind of tax. Usually, the tax is designed with blanket coverage but with large exceptions for obvious things like food and clothing. Household goods are exempt as long as they are kept or used within the household. However, any otherwise non-exempt object can lose its exemption if regularly kept outside the household. Thus, tax collectors often monitor newspaper articles for stories about wealthy people who have lent art to museums for public display, because the artworks have then become subject to personal property tax. And if an artwork had to be sent to another state for some touch-ups, it may have become subject to personal property tax in that state as well.

Who pays

In the United States, the Congressional Budget Office produces a number of reports on the share of all federal taxes paid by taxpayers of various income levels. Their data for 2002 shows the following: [http://www.cbo.gov/showdoc.cfm?index=6133&sequence=0 (Table 2)]
- The top 1% of taxpayers by income pay 33% of all individual income taxes, and 22.7% of all federal taxes.
- The top 5% of taxpayers pay 54.5% of all individual income taxes, and 38.5% of all federal taxes.
- The top 10% of taxpayers pay 67.4% of all individual income taxes, and 50% of all federal taxes.
- The top quintile pays 82.5% of all individual income taxes, and 65.3% of all federal taxes. Their numbers also show, that when broken down by quintile, the social insurance taxes are regressive on an effective tax rate basis only for the highest quintile, though that quintile pays the largest share of social insurance taxes (44%). [http://www.cbo.gov/showdoc.cfm?index=6133&sequence=0 (Table 1)]

Historical taxation levels

Quite a few records of the government tax collection in Europe since at least the 17th century are still available today. But the taxation levels are hard to compare to the size and flow of the economy since production numbers are not as readily available. The government expenditures and revenue in France during the 17th century went from about 20 million livres in 1600 to about 60 million livres in 1650 to about 150 million livres in 1700 when the government debt had reached 1.6 billion livres. The taxation as a percentage of production of final goods may have reached 15%-20% during the 17th century in places like, France, the Netherlands, and Scandinavia. During the war filled years of the eighteenth and early nineteenth century tax rates in Europe increased dramatically as war became more expensive and governments became more centralized and adept at gathering taxes. This increase was greatest in England, Peter Mathias and Patrick O'Brien found that the tax burden increased by 85% over this period. Another study confirmed this number, finding that per capita tax revenues had grown almost six-fold over the eighteenth century, but that steady economic growth had made the real burden on each individual only double over this period before the industrial revolution. Average tax rates were higher in Britain than France the years before the French Revolution, but they were mostly placed on international trade. In France the taxes were lower but the burden was mainly on landowners, individuals, and internal trade and thus created far more resentment. Taxation as a percentage of GDP is today (2003) 56.1% in Denmark, 54.5% in France, 49.0% in the Euro area, 42.6% in the United Kingdom, 35.7% in the United States, 35.2% in The Republic of Ireland, and among all OECD members an average of 40.7%. ([http://www.oecd.org/topicstatsportal/0,2647,en_2825_495684_1_1_1_1_1,00.html OECD national accounts]) ([http://www.forbes.com/global/2004/0524/074chart2.html Forbes magazine])

Historical forms of taxation

In monetary economies prior to fiat banking, a critical form of taxation was seigniorage, the tax on the creation of money. Seigniorage has been replaced by central banking. Other obsolete forms of taxation include:
- scutage - paid in lieu of military service; strictly speaking a commutation of a non-tax obligation rather than a tax as such, but functioning as a tax in practice
- tallage - a tax on feudal dependents
- tithe - a tax, or more precisely a tax-like payment, (one tenth of one's earnings or agricultural produce), paid to the Church (and thus too specific to be a tax in strict technical terms even though appearing as one to the payer)
- Aids - During feudal times Aids was a type of tax or due paid by a vassal to his lord.
- Danegeld - medieval land tax originally raised to pay off raiding Danes and later used to fund military expenditures.
- Carucate - tax which replaced the danegeld in England.
- Tax Farming - the principle of assigning the responsibility for tax revenue collection to private citizens or groups. Some principalities taxed windows, doors or cabinets to reduce consumption of imported glass and hardware. Armoires, hutches and wardrobes were invented to evade taxes on doors and cabinets. Today the most complicated taxation-system is the German one. Three quarters of the world's taxation-literature refers to the German system. There are 118 laws, 185 forms and 96000 regulations (only one comment to taxation covers 2671 pages). The administration spends 3.7 billion Euro just to collect income tax.

Morality of taxation

Many say that activities funded by taxes are beneficial to society and that progressive taxation used in most modern countries is a net benefit to the majority of the population. Others disagree. But as payment of tax is not optional, some people hold that taxation is tantamount to theft. This view is most common among political and philosopical schools of thought such as Objectivism, libertarianism and anarcho-capitalism, which accuse governments of levying taxes through a system of coercion. However most libertarians, particularly minarchists, recommend taxation as a necessary evil as long as only enough money is taken as is necessary for a government to maximize the protection of liberty. Many maintain that taxation is not theft since government is the party performing the act, and moreover that if there is a democracy in place, then it is society as a whole that decides (through the government) what the level and form of taxation is. The American Revolution's "No taxation without representation" slogan took this view. Others assert that the moral stature of any act, such as slavery or the taking of a person's property without his consent, is not contingent upon its legality or who is performing it or whether a majority approves of it. There are several justifications that are offered for compulsory taxation. Taxation of business is justified with the claim that business necessarily involves use of publicly established and maintained economic infrastructure, and businesses are in effect charged for this use. Compulsory taxation of individuals, such as income tax, is based on similar arguments to those for universality of law, territorial sovereignty, and the social contract.

External link

- [http://www.allegromedia.com/sugi/taxes/ US Income Tax Burden]
- [http://www.tax.org/Museum/default.htm The Tax History Museum] provides a synthetic overview of the history of American taxation.
- [http://www.worldwide-tax.com Comparison tax rates table] Data on World Taxes, Income Tax Rates, Tax Rates, Finance & Economy info Worldwide. Category:Taxation Category:Tax reform ja:税金 simple:Tax zh-min-nan:Sòe-kim

Consumption

:"Consumption" is also an archaic name for the disease tuberculosis. Consumption is the using up of a resource. Discussions of human consumption of resources plays an important role in both economics and environmentalism. In Keynesian economics, "consumption" is short-hand for personal consumption expenditure and is determined by the consumption function, especially by the marginal propensity to consume. It is part of aggregate demand or effective demand. poep kan je ook eten. Consumption can also be defined as "the selection, adoption, use, disposal and recycling of goods and services", as opposed to their design, production and marketing. Studies of consumption investigate how and why society and individuals consume goods and services, and how this affects society and human relationships. Contemporary studies focus on meanings, role of consumption in indentity making, and the 'consumer' society. Traditionally, consumption was seen as rather unimportant compared to production, and the political and economic issues surrounding it. With the development of a consumer society, increasing consumer power in the market place, the growth in marketing, advertising, sophisticated consumers, ethical consumption etc, it is recognised as central to modern life. Sociology of consumption has moved well beyond Veblen's early work on 'conspicuous' consumption. Current theories investigate the role of economic and cultural factors in constraining consumption, as development of an approach that sees consumers as 'victims' of producers and their social situation. A counter theory highlights the subversive aspects of consumption, with consumers buying and using goods, places etc in ways unintended by the producers. Examples include city squares turned to skateboard parks, and music sharing on the internet. Studies of consumption come from a variety of backgrounds. Consumer studies attempt to help marketing; user research aims to improve product design; feminist studies highlights the importance of women as consumers, and particularly the role of the domestic arena in consumption; Media studies try to understand the consumption of media products such as television and video games. Critical Theory is an important influence on contemporary studies, as consumption is central to contemporary culture. Studying consumption can be done through traditional survey methods, or various ethnographic techniques. Consumption studies are difficult because they involve investigating everyday life situations, rather than formalised settings such as the workplace. Well known studies of consumption include those by Pierre Bourdieu and Daniel Miller. Favourite topics include studies of food, new technologies, fashion items, and television.

External links

- [http://www.chrisjordan.com/ Intolerable Beauty - Portraits of American Mass Consumption] (Chris Jordan Photography), artistic photos of mass consumerism Category:Economics

Business

Business refers to at least three closely related commercial topics. The first is a commercial, professional or industrial organization or enterprise, generally referred to as "a business." The second is commercial, professional, and industrial activity generally, as in "business continues to evolve as markets change." Finally, business can be used to refer to a particular area of economic activity, such as the "record business" or the "computer business" (see Industry). This article is concerned primarily with the first definition of individual businesses, but also contains links to general business and management topics, in the sense of the second definition. Individual businesses are established in order to perform economic activities. With some exceptions (such as cooperatives, non-profit organizations and generally, institutions of government), businesses exist to produce profit. In other words, the owners and operators of a business have as one of their main objectives the receipt or generation of a financial return in exchange for expending time, effort and capital.

Types of Businesses

There are many types of businesses, and, as a result, businesses can be classified in many ways. One of the most common focuses on the primary profit-generating activities of a business, for example:
- Manufacturers produce products, from raw materials or component parts, which they then sell at a profit. Companies that make physical goods, such as cars or pipes, are considered manufacturers.
- Service businesses offer intangible goods or services and typically generate a profit by charging for labor or other services provided to other businesses or consumers. Organizations ranging from house painters to consulting firms to restaurants are types of service businesses.
- Retailers and Distributors act as middle-men in getting goods produced by manufacturers to the intended consumer, generating a profit as a result of providing sales or distribution services. Most consumer-oriented stores and catalogue companies are distributors or retailers.
- Agriculture and mining businesses are concerned with the production of raw material, such as plants or minerals.
- Financial businesses include banks and other companies that generate profit through investment and management of capital.
- Information businesses generate profits primarily from the resale of intellectual property and include movie studios, publishers and packaged software companies.
- Utilities produce public services, such as heat, electricity, or sewage treatment, and are usually government chartered.
- Real estate businesses generate profit from the selling, renting, and development of properties, homes, and buildings.
- Transportation businesses deliver goods and individuals from location to location, generating a profit on the transportation costs. There are many other divisions and subdivisions of businesses. The authoritative list of business types for North America (although it is widely used around the world) is generally considered to be the NAICS, or North American Industry Classification System. The equivalent European Union list is the [http://www.fifoost.org/database/nace/nace-en_2002AB.php NACE].

Business departments

Within businesses one can often find similar departments, named (and not limited to):
- Administration
- Finance & controlling
- Human ressources
- Management
- Marketing & sales
- Production/service
- Purchasing

Business and Government

Most legal jurisdictions specify the forms that a business can take, and a body of commercial law has developed for each type. Some common types include partnerships, corporations (also called limited liability companies), and sole proprietorships.

Business and Management

The study of the efficient and effective operation of a business is called management. The main branches of management are financial management, marketing management, human resource management, strategic management, production management, service management, information technology management, and business intelligence.

External links

- [http://business-articles.us/ Business Articles]
- [http://www.growfolio.com/ growFolio - Online Business Magazine for Fresh Thinkers]
- [http://finance.yahoo.com/ Yahoo! Finance] Aggregates some really good business articles
- Category:Academic disciplines Category:School subjects ja:ビジネス th:ธุรกิจ

Value added tax

Value added tax (VAT) is a sales tax levied on the sale of goods and services. In some countries, including Singapore, Australia, New Zealand and Canada, this tax is known as "goods and services tax" or GST. VAT is an indirect tax, in that the tax is collected from someone other than the person who actually bears the cost of the tax. VAT was invented by Maurice Lauré, joint director of the French tax authority, the Direction générale des impôts, as taxe sur la valeur ajoutée ([http://fr.wikipedia.org/wiki/Taxe_sur_la_valeur_ajout%C3%A9e TVA] in French) in the 1950s. Personal end-consumers of products, consumers and services cannot recover VAT on purchases, but businesses are able to recover VAT on the materials and services that they buy to make further supplies or services directly or indirectly sold to end-users. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. VAT was invented because very high sales taxes and tariffs encourage cheating and smuggling.

VAT in the European Union

A common VAT system is compulsory for member states of the European Union. The EU VAT system is imposed by a series of European Union directives, the most important of which is the Sixth VAT Directive (Directive 77/388/EC). Nevertheless, some member states have negotiated VAT exemption or variable rates for regions or territories. The Canary Islands, Ceuta and Melilla (Spain), Gibraltar (UK) and Åland Islands (Finland) are outside the scope of the EU system of VAT, while Madeira (Portugal) is allowed to levy variable rates. Under the EU system of VAT, where a person carrying on an economic activity supplies goods and services to another person, and the value of the supplies passes financial limits, the supplier is required to register with the local taxation authorities and charge its customers, and account to the local taxation authority for, VAT (although the price may be inclusive of VAT, so VAT is included as part of the agreed price, or exclusive of VAT, so VAT is payable in addition to the agreed price). VAT that is charged by a business and paid by its customers is known as output VAT (that is, VAT on its output supplies). VAT that is paid by a business to other businesses on the supplies that it receives is known as input VAT (that is, VAT on its input supplies). A business is generally able to recover input VAT to the extent that the input VAT is attributable to (that is, used to make) its taxable outputs. Input VAT is recovered by setting it against the output VAT for which the business is required to account to the government, or, if there is an excess, by claiming a repayment from the government. Different rates of VAT apply in different EU member states. The minimum standard rate of VAT throughout the EU is 15%, although reduced rates of VAT, as low as 5%, are applied in various states on various sorts of supply (for example, domestic fuel and power in the UK). The maximum rate in the EU is 25%. The Sixth VAT Directive requires certain goods and services to be exempt from VAT (for example, postal services, medical care, lending, insurance, betting), and certain other goods and services to be exempt from VAT but subject to the ability of an EU member state to opt to charge VAT on those supplies (such as land and certain financial services). Input VAT that is attributable to exempt supplies is not recoverable, although a business can increase its prices so the customer effectively bears the cost of the 'sticking' VAT (the effective rate will be lower than the headline rate and depend on the balance between previously taxed input and labour at the exempt stage). Finally, some goods and services are "zero-rated". The zero-rate is a positive rate of tax calculated at 0%. Supplies subject to the zero-rate are still "taxable supplies", i.e. they have VAT charged on them. In the UK, examples include most food, books, drugs, and certain kinds of transport. The zero-rate is not featured in the EU Sixth Directive as it was intended that the minimum VAT rate throughout Europe would be 5%. However zero-rating remains in some Member States, most notably the UK, as a legacy of pre-EU legislation. These Member States have been granted a derogation to continue existing zero-rating but cannot add new goods or services. When goods are imported into the EU from other states, VAT is generally charged at the border, at the same time as customs duty. "Acquisition" VAT is payable when goods are acquired in one EU member state from another EU member state (this is done not at the border but through an accounting mechanism). EU businesses are often required to charge themselves VAT under the reverse charge mechanism where services are received from another member state or from outside of the EU. Businesses can be required to register for VAT in EU member states, other than the one in which they are based, if they supply goods via mail order to those states, over a certain threshold. Businesses that are established in one member state but which receive supplies in another member state may be able to reclaim VAT charged in the second state ubder the provisions of the Eighth VAT Directive (Directive 79/1072/EC). A similar directive, the Thirteenth VAT Directive (Directive 86/560/EC), also allows businesses established outside the EU to recover VAT in certain circumstances. Following changes introduced on 1 July, 2003 (under Directive 2002/38/EC), non-EU businesses providing digital electronic commerce and entertainment products and services to EU countries are also required to register with the tax authorities in the relevant EU member state, and to collect VAT on their sales at the appropriate rate, according to the location of the purchaser. Alternatively, under a special scheme, non-EU businesses may register and account for VAT on only one EU member state. This produces distortions as the rate of VAT is that of the member state of registration, not where the customer is located, and an alternative approach is therefore under negotiation, whereby VAT is charged at the rate of the member state where the purchaser is located. The differences between different rates of VAT was often originally justified by certain products being "luxuries" and thus bearing high rates of VAT, whereas other items were deemed to be "essentials" and thus bearing lower rates of VAT. However, often high rates persisted long after the argument was no longer valid. For instance, France taxed cars as a luxury product (33%) up into the 1980s, when most of the French households owned one or more cars. Similarly, in the UK, clothing for children is "zero rated" whereas clothing for adults is subject to VAT at the standard rate of 17.5%.

Rules on pricing within the EU

- Where most of the trade is business-to-consumer, prices must include VAT.
- Where most of the trade is business-to-business, prices do not have to include VAT.

Comparison with a sales tax

VAT differs from a conventional sales tax in that VAT is levied on every business as a fraction of the price of each taxable sale they make, but they are in turn reimbursed VAT on their purchases, so the VAT is applied to the value added to the goods at each stage of production. Sales taxes are normally only charged on final sales to consumers: because of reimbursement, VAT has the same overall economic effect on final prices. The main difference is the extra accounting required by those in the middle of the supply chain; this disadvantage of VAT is balanced by application of the same tax to each member of the production chain regardless of its position in it and the position of its customers, reducing the effort required to check and certify their status.

Example

Without any sales tax

- A widget manufacturer spends $1 on raw materials to make a widget.
- The widget is sold wholesale to a widget retailer for $1.20, making a profit of $0.20.
- The widget retailer then sells the widget to a widget consumer for $1.50, making a profit of $0.30.

With a VAT

Adding on a 10% VAT:
- The manufacturer pays $1.10 for the raw materials, and the seller of the raw materials pays the government $0.10.
- The manufacturer charges the retailer $1.32 and pays the government $0.02 ($0.12 minus $0.10), leaving the same profit of $0.20.
- The retailer charges the consumer $1.65 and pays the government $0.03 ($0.15 minus $0.12), leaving the same profit of $0.30. So the consumer has paid 10% ($0.15) extra. The businesses have not lost anything directly to the tax, but they do have the extra paperwork to do so that they correctly pass on to the government the difference between what they collect in VAT (output VAT, an 11th of their income) and what they spend in VAT (input VAT, an 11th of their expenditure).

With a U.S.-style sales tax

With a 10% sales tax:
- The manufacturer pays $1.00 for the raw materials, certifying it is not a final consumer.
- The manufacturer charges the retailer $1.20, checking that the retailer is not a consumer, leaving the same profit of $0.20.
- The retailer charges the consumer $1.65 and pays the government $0.15, leaving the same profit of $0.30. So the consumer has paid 10% ($0.15) extra. The retailers have not lost anything directly to the tax, but they do have the extra paperwork to do so that they correctly pass on to the government the sales tax they collect. Suppliers and manufacturers are not affected by the tax, though they have to check their customers' status.

Limitations to Example & VAT

It is important to note that the above examples, while valid if one assumes the quantity demanded for a good being taxed does not decrease, is not valid in real world circumstances. The fundamentals of Supply and Demand suggest that any tax raises the cost of transaction for someone, be it the seller or purchaser. In raising their cost, either the demand curve shifts leftward, or the supply curve shifts rightward. The two are functionally equivalent. Consequently, the quantity of a good purchased, and/or the price for which it is sold decrease. The example fails to recognize this, as it is different for every good. In sum, in understanding the above examples, one must realize they assume the tax is non-distortionary. A VAT, as well as any other tax, distorts what would have happened without it. Because the price for someone rises, not all the goods that would have been traded were there no tax are traded. Correspondingly, some people are more worse off than the government is made better off by tax income. In other words, a deadweight loss is created. The income lost by those being taxed is greater than the government's income; the tax is inefficient.

Image:TaxGraph2.jpg
A Supply-Demand Analysis of a Taxed Market

In the above diagram, the area of the triangle formed by the tax income box, the original supply curve, and the demand curve represents deadweight loss.

VAT Rates

Non-EU countries

Note 1: Some Canadian provinces collect 15% for harmonized sales tax, a combined federal/provincial VAT. In the rest, the federal GST is 7% and if the province charges sales tax it is separate and is not a VAT. No real "reduced rate" but rebates are generally available for new housing effectively reducing the tax to 4.5% Note 2: These taxes do not apply in Hong Kong and Macau, which are financially independent as special administrative regions. Note 3: VAT is not implemented in 8 of India's 28 states. Note 4: In the 2005 Budget, the government announced that GST would be introduced in January 2007. Many details have not yet been confirmed but it has been stated that essential goods and small businesses would be exempted or zero rated. Rates have not yet been established. Note 5: The President of the Philippines has the power to raise the tax to 12% after January 1, 2006.

EU countries

External links

- [http://www.taxworld.ie/legislation/VAT/Acts/VATA1972/Contents-2005.htm Irish VAT law]
- [http://www.hotrec.org/areas/taxation/04.html European VAT rates by service type]
- [http://www.deloitte.com/dtt/article/0,2297,sid%253D2959%2526cid%253D5028,00.html VAT/GST sales tax rates around the world]
- [http://europa.eu.int/eur-lex/en/consleg/pdf/1977/en_1977L0388_do_001.pdf Consolidated version of the Sixth VAT Directive (398k pdf)]
- [http://www.hmrc.gov.uk/ HM Revenue & Customs]
- [http://www.maap.co.uk/taxcard.php?choice=taxcard UK VAT Threshold Rates]
- [http://www.guardian.co.uk/business/story/0,3604,1566862,00.html Experts stumped by leap in trade gap], Guardian, September 10, 2005, discusses "missing trader fraud" and "carousel fraud". Category:Taxation Category:Tax reform ja:消費税 th:ภาษีมูลค่าเพิ่ม

Scandinavia

Scandinavia is the cultural and historic region in Northern Europe consisting of the Scandinavian and Jutland peninsulas and the islands inbetween. Today, this region encompasses three sovereign states: :
- Denmark :
- Norway :
- Sweden These three countries have mutually recognized each other as parts of political and cultural region, since the height of the nationalist movements in these countries in the middle of the 19th century. The region takes its name from the peninsula, which in turn is thought to be named after Skåne (Scania) situated at the southern extreme of the Scandinavian peninsula. Prior to the mid-19th century, the region included a larger area of Northern Europe, comparable to the modern "Greater Scandinavia": :
- Denmark-Norway :
- Sweden-Finland The collective label "Scandinavia" nowadays primarily reflects the linguistic similarities, but also the strong historical and social ties between these countries despite their current political independence and different policies during the two World Wars and Cold War and membership in international organizations.

Greater Scandinavia (Norden)

Like other regions of the world, the usage and meaning of the term 'Scandinavia' can vary depending on defining criteria. Some or all of the following geo-political entities may variously be considered peripherally Scandinavian, since they traditionally have had strong political and economic ties with Scandinavia proper:
- Faroe Islands
- Finland (a sovereign republic since 1917-18)
- Greenland
- Iceland (a sovereign republic since 1944-45)
- Jan Mayen
- Svalbard
- Åland These alternative meanings are sometimes considered incorrect in some parts of Scandinavia, and occasionally some people may take offence at such usage. In recent years "Scandinavia" has again increasingly been used by scholars and teachers, in Scandinavia and other regions, in the historical sense with Finland included. [http://www.h-net.org] The term the Nordic countries is used unambiguously for the Scandinavian kingdoms of Norway, Sweden, Denmark, and the republics of Finland and Iceland. More infrequently, the term is also used occasionally to include Estonia, owing to its cultural ties with Sweden and Finland and its proximity to Scandinavia. The terms Fennoscandia and Fenno-Scandinavia are used either to include the Scandinavian peninsula, the Kola peninsula, Karelia, Finland and Denmark under the same term alluding to the Fennoscandian Shield, even if Denmark actually resides on the North European Plain, or they may be used in a more cultural sense, more or less as a synonym for the Nordic countries, to signify the historically close contact between Finnic, Sami and other Scandinavian peoples and cultures.

Etymology

The etymology for the names Scandinavia and Skåne (Scania) is considered to be the same. The name is most probably derived from the Germanic
- Skaðin- meaning "danger" (cf. English scathing and unscathed) and
- awjo meaning "island". It may have referred to the dangerous banks around Skanör (skan- is the same as in Scandinavia, and -ör means "sandbanks") and Falsterbo in Skåne in southernmost Scandinavia. Alternatively, the first element is sometimes attributed to the Scandinavian giantess Skaði from Norse mythology. The original form is considered to be
- Skaðinawjo, which gave rise to different forms in Germanic languages and by non-Germanic scribes. In Beowulf we meet the forms Scedenigge and Scedeland. Ptolemy uses the form Scandia, and Scatinavia appears in Roman texts, e.g. Pliny the Elder, whereas Pomponius Mela used the deviant form Codanovia. The form Scadinavia, the original home of the Langobards, appears in Paulus Diaconus' Historia Langobardorum[http://www.fh-augsburg.de/~harsch/Chronologia/Lspost08/PaulusDiaconus/pau_lan1.html], but in other versions of Historia Langobardorum appear the forms Scadan, Scandanan, Scadanan and Scatenauge[http://www.northvegr.org/lore/langobard/001.php]. In Jordanes' history of the Goths (AD 551) we meet the form Scandza their original home, separated by sea from the land of Europe (chapter 1, 4)[http://www.acs.ucalgary.ca/~vandersp/Courses/texts/jordgeti.html]. The name of the Scandinavian mountain range, Skanderna in Swedish, is artificially derived from Skandinavien in the 19th century, in analogy with Alperna for the Alps. The commonly used names are bergen or fjällen; both names meaning "the mountains".

History

Languages

Main articles: North Germanic languages, Finno-Ugric languages Most dialects of Danish, Swedish and Norwegian are mutually intelligible, and Scandinavians can with little trouble understand each other's standard languages as they appear in print and are heard on radio and television. However it is often assumed that Swedes have the greatest difficulties understanding the other two languages, which may be a consequence of limited access to Danish and Norwegian radio and television in Sweden. The reason why Danish, Swedish and Norwegian are traditionally viewed as different languages, rather than dialects of one language, is that they each are well established standardized languages (Ausbausprache) in their respective countries. They are related to, but not intelligible with, the other North Germanic languages, Icelandic and Faroese, which are descended from the Norwegian dialect of Old Norse. Danish, Swedish and Norwegian have, since medieval times, been influenced to varying degrees by Middle Low German and standard German. The Scandinavian languages are (as a language family) entirely unrelated to Finnish and Estonian, which as Finno-Ugric languages are distantly related to Hungarian. This said there still is a great deal of borrowings from the Swedish language in both the Finnish and Estonian language. Although Swedish speakers constitute a small but influential minority in Finland—and Finnish speakers constitute a minority in Sweden of similar relative size—and most ethnic Finns have studied Swedish as a mandatory school subject, the linguistic distance between the language families is often seen as indicative of a cultural distance and a reason not to classify the Finns as Scandinavian. This view was particularly prominent among Finns influenced by the ethnic nationalist movement called Fennoman in the beginning of the 20th century, as well as the language-based Scandinavian movement in the other Scandinavian countries in the 1850's. Only in 1902 was Finnish language granted an equal status with Swedish as an official language of Finland. Still in present day, the municipality with the highest fraction of native Swedish speakers of the population in the world, Korsnäs, resides in Finland. A rather typical folk-linguistic view might suggest the following. Finns and Icelanders who have studied Swedish and Danish, respectively, as foreign languages often also find it hard to understand the other Scandinavian languages. On the other end of the scale are the Norwegians, who with two parallel written standards, and a habit to hold on strongly to local dialects, are accustomed to variation and may perceive Danish and Swedish as only slightly more distant dialects. In a conversation between a Swedish speaker and a Dane there can be significant difficulties in understanding each other's spoken language, due to differences in pronunciation and vocabulary. In the Faroe Islands Danish is mandatory, and since Faroese people this way become bilingual in two very distinct Nordic languages find it relatively easy to understand the other two Mainland Scandinavian languages. [http://www.nordkontakt.nu/].

Politics

The modern use of the term Scandinavia rises from the Scandinavist political movement, which was active in the middle of the 19th century, chiefly between the First war of Schleswig (Slesvig in Scandinavian) (1848-1850), in which Sweden-Norway contributed with considerable military force, and the Second war of Schleswig (1864) when Sweden's parliament denounced the King's promises of military support. The King proposed the unification of Denmark, Norway and Sweden into a single united kingdom. The background for this was the tumultuous events during the Napoleonic wars in the beginning of the century leading to the partition of Sweden (the eastern part becoming the Russian Grand Duchy of Finland in 1809) and Denmark (whereby Norway, de jure in union with Denmark since 1387, although de facto merely a province, became independent in 1814 and thereafter was swiftly forced to accept a personal union with Sweden). Finland being a part of the Russian Empire meant that it would have to be left out of any equation for a political union between the Nordic countries. The geographical Scandinavia included Norway, Sweden and parts of Finland, but the political Scandinavia was also to include Denmark. Politically Sweden and Norway were united in a personal union under one monarch. Denmark also included the dependent territories of Iceland, the Faroe Islands and Greenland in the Atlantic Ocean (which however historically had belonged to Norway, but unintentionally remained with Denmark according to the Treaty of Kiel). The end of the Scandinavian political movement came when Denmark was denied military support from Sweden-Norway to annex the (Danish) Duchy of Schleswig, which together with the (German) Duchy of Holstein had been in personal union with Denmark. The Second war of Schleswig followed in 1864. That was a brief but disastrous war between Denmark and Prussia (supported by Austria). Schleswig-Holstein was conquered by Prussia, and after Prussia's success in the Franco-Prussian War a Prussian-led German Empire was created, and a new power-balance of the Baltic sea countries was established. Even if a Scandinavian political union never came about there was a Scandinavian Monetary Union established in 1873, with the Krona/Krone as the common currency, and which lasted until World War I. The modern Scandinavian co-operation after World War I also came to include the independent Finland and (since 1944) Iceland and Scandinavian as a political term came to be replaced by the term Nordic countries; and eventually, in 1952, by the Nordic Council institution.

Historical political structure

1/ The original settlers of the Faroes and Iceland were of Pictish or Celtic origin (from Scotland or Ireland), then Nordic origin (mainly Norwegian). zh-min-nan:Skandinavia als:Skandinavien ko:스칸디나비아 ja:スカンディナヴィア simple:Scandinavia

Denmark

The Kingdom of Denmark (Danish: Kongeriget Danmark) is geographically the smallest and southernmost Nordic country, and is part of the European Union. It is located at in Scandinavia which is in northern Europe, but it does not lie on the Scandinavian Peninsula. Denmark borders the Baltic Sea and the North Sea, and consists of a peninsula attached to Northern Germany named Jutland (Jylland), the islands Funen (Fyn), Zealand (Sjælland), Bornholm and many smaller islands, the waters of which are often referred to as the Danish Archipelago. Denmark lies north of Germany (its only land neighbour), southwest of Sweden, and south of Norway. Greenland and the Faroe Islands are Crown territories of Denmark, each with political home rule.

History

:Main article: History of Denmark The origin of Denmark is lost in prehistory. The oldest Danevirke is from the 7th century, at the same time as the new Runic alphabet. Oldest city: Ribe is from about 810. Up into the 10th century the Danes were known as Vikings, together with Norwegians and Swedes, colonising, raiding and trading in all parts of Europe. Viking explorers first discovered Iceland by accident in the ninth century, en route to the Faroe Islands. Erik the Red, or Erik Thorvaldson, was exiled from the colony for manslaughter in 980, and set sail for the west, to explore the lands to the west. He established the first settelments in Greenland around this time, naming the land, according to ledgend, to attract settelers. Erik's son Leif the Lucky(Leif Ericson)finally set foot in the Americas around the year 1000. While some say he was blown off course, it is most likely that he was diliberatly seeking the land spotted by Bjarni Herjulfsson several years earlier. He established a colony at L'Anse aux Meadows, which lasted only a year. Two further attempts at colonization by his brother ended in failure. At various times the King of Denmark has ruled parts of England and Ireland, Norway, Sweden, Finland, Iceland, France, especially Normandy and the Virgin Islands, Tranquebar in India, Estonia and what is now Northern Germany. Scania, Blekinge and Halland were part of Denmark for most of its early history, but were lost to Sweden in 1658. The union with Norway was dissolved in 1814, when Norway entered a new union with Sweden (until 1905). The Danish liberal and national movement gained momentum in the 1830s, and after the European revolutions of 1848 Denmark became a constitutional monarchy June 5 1849. After the Second War of Schleswig (Danish: Slesvig) in 1864 Denmark was forced to cede Schleswig-Holstein to Prussia, in a defeat that left deep marks in the Danish national identity. After this point Denmark adopted a policy of neutrality, as a result of which Denmark stayed neutral in World War I. Following the defeat of Germany, Denmark was offered by the Versailles powers the return of Schleswig-Holstein. Fearing German irredentism Denmark refused to consider the return of Holstein and insisted on a plebiscite concerning the return of Schleswig. In 1920, following the plebiscite, Northern Schleswig was recovered by Denmark. Despite its continued neutrality Denmark was invaded by Germany (Operation Weserübung), on April 9, 1940. Though at first accorded self-rule (which ended in 1943 due to a mounting resistance movement), Denmark remained militarily occupied throughout World War II. The Danish sympathy for the Allied Cause was strong; 1,900 Danish Police Officers were arrested by the Gestapo and sent, under guard, to be interned in Buchenwald. After the war, Denmark became one of the founding members of NATO and, in 1973, joined the European Economic Community (later, the European Union).

Politics and government

:Main article: Politics of Denmark Denmark is the oldest monarchy in the world. In 1849, it became a constitutional monarchy with the adoption of a new constitution. The monarch is formally head of state, a role which is mainly ceremonial, since executive power is exercised by the cabinet ministers, with the prime minister acting as the first among equals (primus inter pares). Legislative power is vested in both the government and the Danish parliament, known as the Folketing, which consists of (no more than) 179 members. The Danish Judiciary is functionally and administratively independent of the executive and the legislature. Elections for parliament must be held at least every four years; but the prime minister can call for an earlier election, if he so decides. Should parliament succeed in a vote of no confidence against the Prime Minister the entire government resigns. The country is often run by minority governments.

Counties

:Main article: Counties of Denmark Denmark is divided into 13 counties (amter, singular: amt), and 271 municipalities (kommuner, singular kommune). The coming Danish Municipal Reform will replace the counties with five new regions and reduce the number of municipalities to 98. The new municipalities will take over most of the responsibilities of the former counties. Most of the new municipalities will have a population of at least 20,000 people. The reform will be implemented on 1 January 2007.
- Aarhus (Århus)
- Frederiksborg
- Funen (Fyn)
- Copenhagen (København)
- North Jutland (Nordjylland)
- Ribe
- Ringkjøbing
- Roskilde
- South Jutland (Sønderjylland)
- Storstrøm
- Vejle
- Viborg
- West Zealand (Vestsjælland) Three municipalities have county privileges:
- Bornholm (regional municipality)
- Copenhagen (København)
- Frederiksberg Copenhagen County comprises the municipalities of metropolitan Copenhagen, except Copenhagen Municipality and Frederiksberg Municipality. Bornholm Regional Municipality comprise the five former municipalities on the island Bornholm and the island's former county. Greenland and the Faroe Islands also belong to the Kingdom of Denmark, but have autonomous status and are largely self-governing, and are each represented by two seats in the parliament.

Geography

Faroe Islands Faroe Islands :Main article: Geography of Denmark Denmark consists of the peninsula of Jutland (Jylland) and 405 named islands. Of these, 323 are habited, with the largest being Zealand (Sjælland) and Funen (Fyn). The island of Bornholm is located somewhat east of the rest of the country, in the Baltic Sea. Many of the larger islands are connected by bridges; the Øresund Bridge connects Zealand with Sweden, the Great Belt Bridge connects Funen with Zealand, and the Small Belt Bridge connects Jutland with Funen. Ferries connect one to the smaller islands. The country is mostly flat with little elevation; the highest natural point is Møllehøj, at 170.86 metres. The climate is temperate, with mild winters and cool summers. Main cities are the capital Copenhagen (on Zealand), Aarhus, Aalborg (on Jutland) and Odense (on Fyn)..

Economy

:Main article: Economy of Denmark This thoroughly modern market economy features high-tech agriculture, up-to-date small-scale and corporate industry, extensive government welfare measures, comfortable living standards, a stable currency, and high dependence on foreign trade. Denmark is a net exporter of food and energy and has a comfortable balance of payments surplus. The Danish economy is highly unionized; 75% of its labour force [http://www.iht.com/articles/2005/01/10/business/unions2.html] are members of a union in the Danish Confederation of Trade Unions. Relationships between unions and employers are cooperative: unions have a day-to-day role in managing the workplace, and their representatives sit on most companies' board of directors. Rules on work schedules and pay are negotiated between unions and employers, with minimal government involvement. The government has been very successful in meeting, and even exceeding, the economic convergence criteria for participating in the third phase (a common European currency) of the Economic and Monetary Union (EMU), but Denmark, in a September 2000 referendum, reconfirmed its decision not to join the 12 other EU members in the euro. Even so, the Danish currency remains pegged to the euro. Denmark has also placed first on the Economist Intelligence Unit's "e-readiness" rankings for the past two years. "A country's "e-readiness" is a measure of its e-business environment, a collection of factors that indicate how amenable a market is to Internet-based opportunities."

Demographics

:Main article: Demographics of Denmark The majority of the population is of Scandinavian descent, with small groups of Inuit (from Greenland), Faroese, and immigrants. According to official statistics in 2003 immigrants made up 6.2% of the total population. Danish is spoken in the entire country, although a small group near the German border also speaks German. Many Danes are fluent in English as well, particularly those in larger cities and the youth, who are taught English in school. Of the religions in Denmark, according to official statistics from January 2002 84.3% of Danes are members of the Lutheran state church, the Danish People's Church (Den Danske Folkekirke), also known as the Church of Denmark. The rest are primarily of other Christian denominations and also about 2% are Muslims. For the last decade Danish People's Church has seen a decline in the number of memberships. In the later years, the old norse religion Asatru has begun to reemerge. Asatru was approved as a religious movement by the Danish government on November 8th 2003.

Culture

:Main article: Culture of Denmark Perhaps the most famous Dane is actually a mythical figure: Hamlet, the title character of William Shakespeare's greatest play, which was set in a real castle (Kronborg) in Helsingør, north of Copenhagen. The Dane most well-known in foreign countries is probably Hans Christian Andersen, a writer mostly famous for such fairy tales as The Emperor's New Clothes, The Little Mermaid, and The Ugly Duckling. Other Danes that is probably known outside of Denmark in various degrees, includes: :See also: List of Danes
- Morten Andersen, NFL kicker (Only in the United States)
- Bille August, film director
- Vitus Bering, explorer and navigator
-