1.

Introduction
The tax system is one of the most important sources of financial resources for the state. Since the first civilizations till present days, it has been one of the main means of amassing resources for state development, financing wars, improving social and cultural life. There are a variety of taxes and ways to collect them. But just as varied are all the tax systems. Because of geographical spread, cultural, ideological and religious differences and the colonial activities of many European countries, as well as their influence on the other continents many tax systems were formed, each with their own particularities. Some took elements from European systems; some were kept; some systems are more flexible and changing continuously; some are rigid and remain unchanged (or probably with few differences). But the most important tax systems, the systems which are considered as models for other countries are the systems of the US, the European systems and some Asian ones (most important China and Japan). The are of course similarities between systems, due to Imperial European countries which defined much of the global politics of the 19th and first half of the 20th century. But there are also notable differences as well (the best example being the US). To understand the differences and similarities we have to make two separate comparisons: a historical and a contemporary one. What follows is a brief introduction to the appearance of some of the most notable tax systems, their historical evolution, and the present day situation. Some regions and countries will be explained more detailed, some will only be briefly touched upon (but with the main element explained), but towards the end there will be a solid picture of what defines most tax systems, their need and what influences them.

2. Historical Evolution
Some of the first tax systems in Europe which can be considered as state tax appeared in the Greek City States and later in the Roman Republic where many tax policies were taken from Greek models and many other policies were added as the Roman Republic grew and eventually turned into the Roman Empire. While the Greek City States provide the first models of state tax with a semblance of policy, it is in the Roman Republic turned later Empire that the need appeared for an efficient, regulated tax system made standard for the entire Empire. As it grew so did the need for more financial resources which were formed (at that time) only by taxes. Here we register some of the first tax rates, meaning that nobles were taxed at different rates than the common citizen (which ironically were taxed at low rates, just as the high income citizens of the US today), and non-citizens were also taxed at different rates than the citizens (in the period of the Republic at lower rates to encourage trade, in the period of the Empire at the same rates). Also we see the appearance of the war tax policy, which was practically a permanent tax since roman history is marked by constant expansion and civil wars. Unfortunately, no matter how standardized the tax policy may be, it also requires an efficient bureaucracy to maintain it, and because of the huge territorial expanse of the Roman Empire such a bureaucracy is difficult to maintain, and it lead to corruption and neglect of the tax system. Also, one of the main factors which contributed to the downfall of the Roman Empire (from a financial point of view) was the rigidity of the tax system. While it is true some tax rates and provincial taxes were introduced, for the most part taxes remained unchanged. This rigidity leads to insufficient funds which in turn lead to degradation of many roman constructions and the weakening of the Roman Army. By comparison, there was another empire which can be considered the best model of bureaucracy and efficient tax system, the Chinese Empire (called many other names depending

on the dynasty that ruled the empire). The Chinese Empire is older than the Roman Empire, older even than the Republic, yet it endured as a state (with brief periods of expansion, civil war and lost territories) until the Japanese conquest at the beginning of the 20th century. In the pre-modern era of Chinese history, taxation by the various dynasties that ruled China varied greatly. Overall, the most important source of state revenue was the tax on agriculture, or land tax. During some dynasties, the government also imposed state monopolies which became important sources of revenue for the government (a model unchanged, or adopted by the communist regime). The changes in taxation were possible thanks to the efficient bureaucracy which in turn was possible due to the ideology of the Chinese citizen, in which every member has his own place, purpose, and all are indebted to the government since it is ruled by divine mandate. The Japanese taxation system had the same characteristics since Japan was founded after colonists moved there from mainland China. China and Japan changed to a more permanent and standardized system after World War 2. After the collapse of the Roman Empire, the middle Ages began. In this period there are no references to any state tax system. Feudal lords took taxes from their subjects at any rate they chose, and the king took taxes from his subjects and vassals (but not all the lords from his kingdom). While kingdoms resembled the states from that period, these were nothing more than collections of lords and vassals that answered to the king (and sometimes doing that only when it pleased them and in times of war), so no one paid taxes to the state. Any semblance (but not actual) of state tax was tribute, which kings and lords demanded from their vassals when they needed such resources. But mostly, resources were formed from pillaging and war. The first tendency towards state taxes, regulated by a central body started in the 16 th century, and more preeminently in the later 17th century when the notion of absolute monarch took form. Now, there was always one figure to which all citizens must answer to, and, more importantly, must pay taxes. Because there was only one central governing figure, state taxes appeared again, with new regulations and taxes (started due to recent colonial activities of most European states). Bureaucracy was reintroduced (but still inefficient when compared to the Chinese and Japanese models) and this lead to new cultural and technological development. For the best example of state taxes in that period and one of the most efficient, one has to look at Louis the 14th, considered the pinnacle of an absolute monarch. New trade taxes for the goods that came from the new world, and from trade with Asia filled many coffers. Only Russia remained backward compared to the rest of Europe. Even with Czar Ivan the Terrible becoming the first absolute monarch, taxes remained in a feudal state. The main source of taxation was the land tax. Even with the expansion of the Russian Empire and the reforms of Peter the Great and Catherine the Great, until the fall of the Russian Empire the Russian monarchy relied greatly on agricultural, land and war tax, mostly because the Russian state during the period of its existence remained largely rural. But one of the most important events in the 18 th century was the appearance of the United States of America. Before 1776, the American Colonies were subject to taxation by the United Kingdom, and also imposed local taxes. Property taxes were imposed in the Colonies as early as 1634. In 1673, the UK Parliament imposed a tax on exports from the American Colonies, and with it created the first tax administration in what would become the United States. Other tariffs and taxes were imposed by Parliament. Most of the colonies and many localities adopted property taxes. Under Article VIII of the Article of Confederation, the United States Federal government did not have the power to tax. All such power lay with the states. The US Constitution adopted in 1787, authorized the Federal government to lay and collect taxes, but required that some types of tax revenues be given to the states in proportion to population. Tariffs were the principal Federal tax through the 1800s. The first Federal income tax was

adopted as part of the Revenue Act of 1861. The tax lapsed after the American Civil War. Subsequently enacted income taxes were held to be unconstitutional by the Supreme Court because they were not given to the states. In 1913, the 16th Amendment was ratified, permitting the Federal government to levy an income tax without giving all of it to the states. Also in the US in 1911 the first corporate tax appeared in Wisconsin. Post World War 2 era was marked by many tax changes. Each country in Western Europe adopted different tax policies, in dependence of the need for reconstruction after the war, and with the shift from colonial and imperialist attitude to capitalism and democracy. Some tax policies were adapted from the US (though only as models). The most important event for Europe in post war world 2 (an event which is a consequence of that war) is the formation of the European Union. While this did not mean that all member states had the same tax policies, it did mean that certain rules and limits were imposed, and regulation and cooperation was maintained between member states. On the other side of the map, the Soviet Union had the same tax system imposed on all member states. A particularity of the Soviet tax system is self-taxation. It was a form of collecting various resources (money, food, etc.) in rural areas for local needs. Described as voluntary, it was established at a common meeting of the residents of an administrative unit (settlement or selsoviet). The common annual rate was set over the unit, with the rate for independent farmers had to be at least 25% higher than for kolkhozniks, sovkhozniks and factory and state workers. On the other side of the globe, China became a communist state, so it adopted all of the Soviet Union tax system. Taxes provide the most important revenue source for the Government of the Peoples Republic of China. As the most important source of fiscal revenue, tax is a key economic player of macro-economic regulation, and greatly affects China's economic and social development. Japan, in order to make a speedy recovery raised individual income taxes, but lowered corporation taxes, thus insuring a good ground for developing technologies. And across the Pacific many changes in the US tax system occurred as well. Firstly, in time of the Great Depression and World War 2, taxes for individual income were higher than ever before. After WW2 however income tax rates were reduced significantly (particularly during the Johnson, Nixon and Reagan Presidencies). This was done in order to encourage consumption (and also to improve public image). Another significant event was the Tax Reform Act of 1986. The thousand page reform lowered tax rates, adopted sweeping expansions of international rules, eliminated the lower individual tax rate for capital gains, added significant inventory accounting rules, and made substantial other expansions of the law.

3. Modern Differences
Even with the creation of the European Union, there have been no attempts at cross border harmonization of the tax systems of member states. Provided that they respect EU rules, each member state is free to choose its own tax system that they consider most appropriate. There is action at the EU level concerning taxes only when individual member states could not provide an effective policy or solution to budgetary deficits. Another main priority for the tax policy is addressing the concerns of individuals and businesses operating inside the European market by eliminating tax obstacles to all forms of cross-border activity. And when talking about Europe one must not forget to mention the Russian Federation. While not a member of the European Union it still remains an important economic player on the European map. When talking about the Russian Federation one must not fail to mention that for a federal state, it has one of the most centralized tax systems in Europe. Even though the Russian Tax Code is designed as a complete system for federal, regional and local taxes, most of the revenue goes to the state but does not

flow back to the federal states (such as in the case of the US, where a part of the taxes go back to the states from which these taxes were levied in order to provide more resources for development in which every state can oversee its own development program). Taxes or levies not listed explicitly by the Code or enacted in violation of its specific provisions are deemed illegal and void. Another particularity is the regressive tax system. That means that the more income you have, the less you get taxed. This puts a bigger burden on lower and middle class citizens. The budget also relies heavily on taxes from oil and gas corporations. The Russian Ministry of Finance estimated that revenue from oil-related taxes accounted for 73 percent of the budget in 2010. But here is a small paradox of the Russian Tax Code. Rates for oil-related taxes and tariffs, unlike regular taxes, are set not by the Tax Code but by government decree. Yet the Tax Code states that all taxes or levies not listed in the Code are deemed illegal. That means that actually the Russian government can ask for any kind of tax by government decree without going through the trouble of changing the Code. In The Peoples Republic of China many changes to the tax system have been seen in the past decades, but the most significant one has been the 1994 tax reform, where China has preliminarily set up a streamlined tax system geared to the socialist market economy. Within this model, privately owned enterprises have become a major component of the economic system alongside the central state-owned enterprises and collective / township village enterprises. However taxes for the privately owned enterprises have been lowered to encourage investment while taxes for the collectives and township enterprises have risen above pre 1994 levels (since someone has to bear the burden of the Chinese Budget). In Japan, taxation for individual income is progressive. That is, the higher the income, the higher the rate of tax payable. But there are reduced tax rates for certain income earners. Japan corporate tax is fixed at 30 percent and again, there is a reduced of tax for certain corporations. A particularity of the corporate tax there are an additional 2 classes of local tax paid by the corporation: 1) the inhabitant tax; 2) the enterprise tax. These 2 classes of local tax significantly increase the rate of Japan corporate tax, so that it may, in actual fact, reach 41 percent. But currently the most complex tax system is the one belonging to the US. The amount of federal tax laws and regulations runs over 70000 pages. 50 percent of these laws and regulations appeared in the recent decade. Even the simple barter where goods are exchanged without any additional payment has become a taxable event. Many changes and complexities can be attributed to new innovations in technologies and more importantly, the rise of the internet. Even bartering goods over the internet requires a set of laws and regulations, because not only the event is taxed, but it also depends on what goods youre bartering. Also the government has used the federal tax code for social engineering, subsidizing and punishing behavior to advance national goals. Many companies and lobby groups ask tax policy makers for new loopholes and possibilities for tax deductions, or increasing tax on certain goods in order to promote their products, thus increasing the complexity of the tax system. And one must never forget one of the most important factors which contribute to the complexity of the tax system is the fact that the United States is a federal republic with autonomous state and local governments. That means that every state has its own taxes, adding more to the complexity. Many economists argue that the introduction of the flat tax would greatly simplify the tax system. The flat tax taxes income at one time at one low rate when you earn it. Currently 27 countries have the flat tax, 20 of which are former soviet republics. So far, no member of Congress proposed a bill to introduce the flat tax.