Quick Answer: A tax is a mandatory financial charge or levy imposed on an individual or legal entity by a governmental organization to support government spending and public expenditures collectively or to regulate economic activity through measures designed to mitigate negative externalities. Tax compliance refers to policy actions and individual behavior aimed at ensuring that taxpayers are paying the right amount of tax at the right time and securing the correct tax allowances and tax relief. In economic terms, taxation transfers wealth from households or businesses to the government. This affects economic growth and welfare, which can be increased or decreased. Certain countries function as tax havens by imposing minimal taxes on the personal income of individuals and corporate income. These tax havens attract capital from abroad while resulting in loss of tax revenues within other non-haven countries.