Taxes can sound boring, but they pay for schools, hospitals and roads. This guide shows where your money goes and why it matters.
This article is the reading companion to the free Mondosol lesson Money Matters: Taxes & Why We Pay, part of the Money course. Read it, watch the videos, or press play and listen first, then practise in the lesson.
Free: create your free Mondosol account to practise this lesson and track your progress.
In this article
What taxes are
A tax is money people pay to the government so it can run public services. A public service is something the government provides for everyone, like firefighters, schools or roads.
The key words
| Word | What it means |
|---|---|
| Tax | Money paid to the government to run public services |
| Income tax | A tax on the money you earn from work |
| Sales tax | Extra money added to the price when you buy something |
| VAT | Value Added Tax, a tax included in the price of goods and services in many countries |
| Tax return | A form you fill in each year to show how much tax you owe |
| Taxpayer | Any person or business that pays taxes |
| Public service | Something provided for everyone, like schools or fire services |
Common types of tax
Rules and rates differ from country to country, so always check the official tax authority where you live. In general, you will meet these:
| Tax | How you meet it |
|---|---|
| Income tax | Taken from what you earn at work |
| Sales tax or VAT | Included in or added to the price in shops |
| Other taxes | Taxes on property, companies or specific goods, depending on the country |
Where the money goes
Taxes pay for things most of us use without thinking about the bill: schools, hospitals, roads, public transport, police and fire services, and support for people who need help.
That is why it helps to see tax as a shared fund. Everyone adds a little, and everyone can use the services.
Taxes in your own life
- Look at your first payslip: it shows tax taken before you are paid.
- Check receipts and prices to see if VAT or sales tax is included.
- Keep your documents in one place so a tax return is easier.
- Use official sources when you are unsure. Mondosol cannot give tax advice.
Starting your first job? Our lesson on your first pay cheque is a good next step.
Watch: taxes
Two videos explain what taxes are and what they pay for. They are explanations, not tax advice.
Video: “What are Taxes and How do They Work? Tax facts for kids” by Hey! Guess What, on YouTube.
Video: “Taxes: Crash Course Economics #31” by CrashCourse, on YouTube.
Take it further
Reading is a good start. These options help you go from knowing to doing.
All courses, live coaching sessions and members-only events, with a 30-day money-back guarantee. See the plans
A live session on Google Meet to turn this topic into your own plan. Book a session
Frequently asked questions
Why do we pay taxes?
Taxes pay for public services that everyone can use, such as schools, hospitals, roads and emergency services.
What is the difference between income tax and sales tax?
Income tax is taken from what you earn. Sales tax or VAT is added to or included in the price of what you buy.
What is VAT?
Value Added Tax is a tax included in the price of many goods and services in many countries.
What is a tax return?
A yearly form that shows what you earned and how much tax you owe. Rules differ by country, so check your tax authority.
Do kids and teens pay taxes?
Often yes, through sales tax or VAT when they shop. Income tax depends on whether and how much you earn, and on local rules.
Keep learning
- Course: Money
- Lesson (practise it): Money Matters: Taxes & Why We Pay
- Read next: Needs vs. Wants and Borrowing and Debt
- Related: Skattekort: How the Norwegian Tax Card Works
Educational, not financial advice. The example numbers are invented, and this post contains no affiliate links. Mondosol is not a licensed financial adviser. Tax rules differ by country; check your official tax authority.
Ready to practise?
Create your free account and try the Money Matters lessons.
Create your free Mondosol account
