Final answer:
Withholding taxes are deducted from an employee's earnings, such as salaries, bonuses, and commissions, and include payments toward income tax and social security. Dividends are generally not subject to withholding tax as they're considered investment income. Employers also pay taxes based on employee wages to fund government programs.
Step-by-step explanation:
Tax deductions at source, commonly referred to as withholding taxes, are withheld from various types of remuneration. These deductions are typically made from employee earnings such as salaries, bonuses, and commissions. Contrary to these, dividends are often taxed differently as they are considered investment income, not earned income.
Withholding taxes cover advance payment of income tax, social security contributions, and various insurances, including unemployment and disability. Employers also pay taxes based on the employee's wages, which fund the social security system and other insurance programs. The payroll taxes are mandated by law and are essential for the funding of government programs like Social Security and Medicare.
Corporate taxes or corporate income taxes, also referred to as company tax or corporation tax, are based on the net profits of a business rather than an individual's salary and are another significant source of government revenue.