Taxpayers (Definition, Types) | Rights & Responsibilities

What is Taxpayer?

The taxpayer is a person or a corporation who has to pay tax to the government based on their income, and in the technical sense, they are liable for, or subject to or obligated to pay tax to the government based on the country’s tax laws.

Explanation

In taxation, a taxpayer is usually termed as an Assessee, who is a person liable to pay tax either directly or indirectly to the government based on nature and quantum of income earned during the previous year.
The Taxpayer is further required to pay tax to the government in specified routes/methods such as through assessment of his income and direct deposit of tax in case of direct tax and during the purchase of a product or service in case of indirect tax.
Taxpayers are identified based on the identity card issued by tax authorities in their respective countries such as in India, PAN cards are used as identity cards issued by the tax department for identification and assessment of a taxpayer.

Types of Taxpayers

Taxpayers are primarily classified into two types that are individuals and corporations:

Individuals – Taxpayers are basically human beings who are liable to pay tax for the income they earn
Corporations – Taxpayers are basically body corporate that is liable to pay tax on the profits earned during the previous year from its business activities.

Rights of Taxpayers

They have a right to be informed about the tax laws and their transactions with the tax department.
The right to question tax authorities in case of breach of their duties and the right to be answered for such queries.
The right to submit their tax returns and other related applications.
The right to appoint an authorized representative to perform their duties related to tax.
Also, they further have the right to be redressed for default committed by tax authorities.

Responsibilities of Taxpayers

They have a responsibility to be cooperative, well mannered, fair, and honest and further maintain integrity during assessment and payment of tax;
They must provide reasonable facilities and assistance to enable the audit officers to carry out their duties
They should respond aptly to queries of tax authorities and respect their duties.
They should not declare incorrect income or seek reliefs falsely while submitting their tax returns.
Taxpayers are also required to keep safe their tax records for a certain period based on the regulatory requirement from the end of the assessment year in which the income tax return was filed.

Taxpayers vs Non-Taxpayers

Taxpayers are those who are liable to or subject to payment of tax to the government. Whereas non-taxpayers are those who are not paying tax to the government from the income earned by them, there are several reasons for the non-payment of the tax such as.

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They may be exempted from payment of tax due to the nation having double taxation avoidance agreements with the other nation in which they are earning or situated.
Maybe the income earned by them in the previous year is not taxable as per tax laws which is usually referred to as an exempt income.
The taxpayers may even violate the law by not paying taxes which can be termed as tax evasion. Tax evasion is completely different from tax avoidance (which involves the use of legal methods to lower the amount of tax payable to the government) and tax management (involves following correct procedures for ensuring timely payment of tax).

Conclusion

Based on the information provided in this article we can conclude that almost all the individuals and corporations are directly or indirectly involved in the payment of tax and termed as taxpayers in the economy due to the nature in a collection of tax by the government.
Also, the classification about the types of taxpayers discussed in this article is only a brief summary whereas in reality the classification is further divided depending upon the tax laws varying across nations such as in India, individuals residential status is divided further into Resident and Ordinary Resident, Resident but not Ordinary Resident for determining the tax payable by them.
And also in few tax haven countries tax is either collected only from the corporation or only from individuals depending on their revenue structures and its regulations such as Dubai where individuals are not liable to pay tax on the salary that they earn in the previous year whereas only companies engaged in banking and oil industries are required to pay tax.

Taxpayers