Essential Types of Taxes That Every Business Must Know 

Essential Types of Taxes That Every Business Must Know 

Ever wondered about the types of taxes your business might owe to the government? Most people do not learn about the different types of taxes and which of them are applied to their business. As a result, they are unaware of how to manage their taxes and reduce the tax liability of their company. Learning about the different types of taxes will help you understand why each tax has been imposed on your business. Knowing the reasons behind it will help you learn how to reduce specific tax liabilities by investing in your business or incorporating loans. 

Understanding tax planning can be overwhelming in the initial phase, so it is always better to have expert advice as it is the question of your business’s growth. While struggling with managing your finances, you can contact San Mateo business tax services to reduce your workload and save a significant amount of money spent on taxes. 

Essential types of taxes that every business must know 

  • Progressive tax 

As the name suggests, a progressive tax is a liability that will increase as your earning capacity increases. Depending on your income, a certain percentage of tax will be deducted from your salary, and as your earnings increase every time, the reduction amount will increase. This Is because the tax is based on a percentage and not a fixed amount, which is called a progressive tax. 

  • Proportional tax 

Proportional tax in a business or for an individual remains constant in most cases, even if your earnings increase. However, this can also become an issue if your income decreases, as the amount of tax you must pay will remain the same. So for people with a low income, it can take away a significant amount from their salary. 

  • Regressive tax 

A regressive tax is one of the best tax options. In this program, the tax liability reduces as the person’s income increases, which means a person has to pay much less tax as they start earning more. As a result, you will save much more from your salary and can put the money to better use. 

  • Digressive tax

A digressive tax might be a bit confusing for a beginner to understand. It is partly related to progressive tax as the amount of tax liability increases or decreases according to your income. However, it also remains constant sometimes, even if your income increases. 

In a digressive tax, the tax liability rises gradually but maintains consistency after reaching a certain level.