GLOSSARY

The end of February is the time of the year when activities of our tax administration become of interest to the general public. Except receiving and processing tax returns of Croatian taxpayers, some of its duties are entering tax liabilities in tax accounts as well as collecting and refunding taxes. It is the main agency that collects money for the state budget. The taxes are collected by withholding, part of employees’ income throughout the year (Pay As You Earn) and paying it to a tax authority. As we are all well aware, these taxes are the main source of revenue from which various social benefits are then paid by the state.

The two most well-known tax authorities are the US Inland Revenue Service or the famous IRS and British Her Majesty’s Inland Revenue and Customs. In Great Britain and the USA taxpayers have the possibility of filing their self assessed tax returns online and every year an increasing number of them use this opportunity and thus ensure their tax refunds are delivered earlier. Tax return is an official form filled in by taxpayers in which all income received during the year is reported together with deductions and tax liabilities to determine each taxpayer’s tax liability (the amount of taxes owed) for the year.

Of course, there are limits to the tax relief to which you are entitled. In the UK you can have tax relief on life insurance policy, your payments into a pension scheme but you can also claim tax relief for gifts of money to UK charities. Certain categories of taxpayers are required to file returns by law while others can choose whether filing is to their advantage, that is whether they have overpaid their taxes and can expect to get a tax refund. Individuals are entitled to claim a personal exemption for themselves and any dependents they support. The personal exemption, in the same way as a tax deduction, reduces your taxable income, so you pay taxes on less income.

Similarly to the Croatian tax law, medical expenses in the USA can be claimed as a deduction for income tax purposes. The tax administration will refund overpaid tax directly into the bank account you provided in the tax return. While we are here focused on refunds of overpaid tax which we expect to receive, Americans are faced with difficulties in meeting their tax obligations in the first place and the IRS is showing its human face by deferring tax collection or offering them to pay their tax liability in instalments. Owing tax is not a crime but not filing a tax return is in some cases (that is, when you owe money) illegal and can be considered a form of tax evasion together with other activities by which taxpayers try to escape their tax liability.