human
How do the US and UK approaches to taxation differ?
assistant
The primary difference between the US and UK approaches to taxation is that the US has a federal income tax system while the UK has a more distributed system. In the US, federal income tax is collected from taxpayers by the Internal Revenue Service (IRS) in order to fund government services and activities. The UK operates a taxes system based upon the ability to pay principle, which involves direct and indirect taxes. Direct taxes are taxes on income, such as income tax, and indirect taxes are taxes on goods and services, such as sales tax. Both countries also have payroll taxes and taxes on inheritance, capital gain and corporate profits. Additionally, the UK levies a Value Added Tax (VAT) on goods and services, which is not present in the US system.