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    Can someone kindly explain the reason why I see this error ?
        tax.init = function (pIncome, pRate)
          tax._income = pIncome
          tax._rate = pRate
          end

        tax:init(12200, 12)



The way Lua handles OO, the call to tax:init(12200, 12) is syntactic
sugar for
tax.init(tax, 12200, 12). Therefore, tax._income is assigned tax and
tax._rate
is assigned what you think is pIncome and what you think is pRate is
thrown
away. 

Try changing the call to tax.init(12200, 12) or change the function
definition
to tax.init = function (self, pIncome, pRate).

Chris Berardi