Importance And Role Of Taxation

Importance and role of taxation Taxation is the process by which the government imposes charges on citizens and corporate businesses. The charges collected by the government are used to fund different government projects that would in the end benefit the citizens of the country as a whole. The taxation process can benefit both the society and business as a whole

Society Taxation is important to society because the government use the tax collected to fund projects related to health care systems, education systems, and public transports. Also, the money collected can also be used to give unemployment benefits, pensions, and other matters that can benefit the society as a whole. Without tax, the government would not be able to fund the essential projects and services that people need. The government allocates the money collected from the taxpayers to different areas of the country. The areas picked are rural areas. Some rural areas may have resources that might be beneficial for both the country and its economy. Therefore, the government would allocate part of the tax money to provide the essential services required and to improve the standards of such places.

Other important role taxation has is it can affect the rate of economic growth of a country. Although taxation may discourage investors from investing in a country with a strict tax rules, however, a recent study made by Prof. Myles, suggests both the positive and negatives affects of tax would be offset, and thus, only a very small result would be noticed. In his study, he discovered in developing countries, tax contributes to almost 10% of the gross domestic product of the economy. Thus, resulting in an economic growth.

Moreover, another tax benefit on society is it discourages certain undesirable activities such as; liquor, tobacco and gambling. On such activities the government imposes excise tax, discouraging individuals from selling such commodities. Other important role tax provides to the society other than funding of government expenditure is information about the total price for the government projects.

Businesses The concept of taxation is vital to businesses in the economy, as the amount of tax taken from each business is accumulated, one of the ways that tax is used to help business is through the government funding the money back into the economy as long term loans and/or funding. The money could also be pumped back into the economy by the government in the event of an economic recession or turmoil. Another benefit of taxation to the society, Is that it helps develop the country as a whole, and the more developed the country is; would therefore mean better prospects for the business's as it increases the well being of the country's society.

For the worldwide operation of firms, taxation plays a vital role. Taxation has become the core of various financing decisions which includes internationalinvestment decisions, international working capital decisions, fund raising decisions and the decisions related to dividend and other payments. The tax decision is also relevant in domestic firms also.

What is taxation? Why is taxation 1 800 new loan so important in a particular nation or state? What makes it a very significant aspect of governance?

Cooley defines taxation as the process or means 02116 cash advance by which the sovereign, through its law-making body, raises income to defray the necessary expenses of government. Expressed in another way, it is a 1 800 numbers for payday loans method of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits and must, therefore, bear its burdens. Malcolm explains that taxation is the power vested in the legislature to impose burdens or charges upon persons and property for the purpose of raising revenue for public purposes. The nature of the state’s power to tax is two-fold. It is both an inherent power and a legislative power. It is inherent in nature being an attribute of sovereignty. It has been argued that it is literally impossible for the state to run its affairs without taxes. Its existence and operations are dependent primarily from the revenues and charges imposed from various sources. It is a legislative power because it involves promulgation and implementation of rules. Taxation is a set of rules, how much is the tax to be paid, who pays the tax to whom and when it should be paid. Government financial operations are well-nigh impossible without taxation. Apart from this, taxation can be a powerful means in order to achieve the golas of social progress and the objectives of economic development. It serves as a device to encourage the growth certain activities by way of giving exemptions, discourage use of certain products by way of imposing heavier charges like those sin taxes which are imposed upon tobacco products, or strengthen anaemic enterprises, also by way of tax exemptions. Local industries may be protected through taxation by imposing high customs duties to foreign goods. Moreover, taxation can also be used to reduce inequities or inequalities in wealth and income by progressively higher taxes as in the case of estate and income tax. So based on the foregoing premises, it is clear that taxation is indeed the lifeblood of the state, without which the existence of the state will be put to jeopardy.

What are the Importance of Tax Tax is a major source of government revenue and its contributes for the overall development and prosperity of a country.  Raising government revenue in terms of income tax, custom duty, excise duty, entertainment tax, VAT, land revenue tax etc. from various sectors in order to initiate development and welfare programmes.  Maintaining economic stability by reducing economic inequalities by means of equitable distribution of wealth by way of imposing tax to the income earners and improving the economic condition of the general people.  Regulating the economic sectors into right direction by encouraging the production and distribution of useful goods and discouraging the harmful products by imposing high tax rate on them.  Building and strengthening the national economy by encouraging and protecting national industries and promoting export trade.  Reducing

regional

economic

disparity

by

encouraging

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entrepreneurs to establish industries in remote and backward regions by giving tax exemptions, rebates and concessions etc.

Taxes are mainly used to finance the expenses incurred by government to manage an economy. These expenses include: health care, education, garbage collection and operating government business entities. Taxation is also used by government for several other purposes. a. To reduce pollution by taxing offending firms b. To discourage unhealthy lifestyle e.g. a tax on cigarettes c. To protect local and infant industries by taxing imports d. To achieve greater equality of wealth and income. Revenue from taxation is used to help the very poor e.g. providing food stamps. e. To improve the balance of payments (BOP) by increasing the duties charged on imported goods. f. To control spending in an economy thus reduce inflation

For economic development of a country, tax can be used as an important tool in the following manner: 1. Optimum allocation of available resources: Taxis the most important source of public revenue. The imposition of tax leads to diversion of resources from the taxed to the non-taxed sector. The revenue is allocated on various productive sectors in the country with a view to increasing the overall growth of the country. Tax revenues may be used to encourage

development activities in the less developments areas of the country where normal investors are not willing to invest. 2. Raising government revenue: In modern times, the aim of public finance is not merely to raise sufficient financial resources for meeting administrative expense, for maintenance of low and order and to protect the country from foreign aggression. Now the main object is to ensure the social welfare. The increase in the collection of tax increases the government revenue. It is safer for the government to avoid borrowings by increasing tax revenue. 3. Encouraging savings and investment: Since developing countries has mixed economy, care has also to be taken to promote capital formation and investment both in the private and public sectors. Taxation policy is to be directed to raising the ratio of savings to national income. 4. Reduction of inequalities in income and wealth: Through reducing inequalities in income and wealth by using a efficient tax system, government can encourage people to save and invest in productive sectors. 5. Acceleration of Economic Growth: Tax policy may be used to handle critical economic situation like depression and inflation. In depression, tax is set to increase the consumption and reduce the savings to increase the aggregate demand and vice verse. Thus the tax policy may be used to strengthen incentives to savings and investment. 6. Price Stability: In under developed countries, there is another role to maintain price stability to ensure growth with stability.

7. Control mechanism: Tax policy is also used as a control mechanism to check inflation, consumption of liquor and luxury goods and to protect the local poor industries from the uneven competition. Taxation is the only effective weapon by which private consumption can be curbed and thus resources transferred to the state. Thus the economy can ensure sustainable development. Thus it can be said that the economic development of a country depends various reasons one of them are on the presence of an effective and efficient taxation policy.