To make the tax system sufficiently productive it should be broad-based and both direct and indirect taxes find place in it. Thus taxation in a developing economy has not only to restrain current unproductive consumption but also to check the large increases in consumption when with the increase in national income, economic surplus goes up.
Therefore, a tax system may do less economic damage if it raises moderate amounts from several bases rather than large amounts from one or two.” In a developing economy such as ours, taxation should serve as an instrument of economic growth.
Progressive taxation of income and wealth provides this elasticity to the tax system. For this purpose, tax system must have built-in-flexibility. Oklahoma’s sales tax is one example. means that taxpayers and leaders can easily find information about the tax system and how tax money is used.
This calls for mobilization of resources by the Government so as to finance capital formation in public sector. Expansion in economic surplus accruing to the individuals should be mobilised and invested in the public sector for further growth. It is just as important to seek vertical equity so government does not become a burden to low-income residents. This calls for a mix of various direct and indirect taxes.
An important principle for a developing country is that it should mobilise economic surplus found in the economy. A good tax system should follow the principle of diversity.
We also can find out who (in broad terms) pays the tax and who benefits from tax exemptions, deductions, and credits. This is because if a Government tries to get large revenue from a single tax or few taxes, it will have to raise the rates of taxation too high which will not only adversely affect the incentives to work, save and invest but also encourage evasion of taxes. Sorry, your blog cannot share posts by email. In an underdeveloped economy, there are particular economic sectors and classes of people where the economic surplus is generally found and which therefore should receive the special attention of tax authorities in such countries. The tax system of a country develops according to the tax ideals of the government and the goals of public policy, which the system has to incorporate in its structure.
is just as important, however. A good tax system for a developing economy should also serve as an instrument for reducing economic inequalities. To have built-in-flexibility, the taxation system must be progressive in relation in the changes in national income. The practical shape of the tax system of a country depends on its historical background. Post was not sent - check your email addresses! The ideal of simplicity may lead us to advocate a single tax. means that taxes must provide enough revenue to meet the basic needs of society. Property taxes often come closest since there is typically a close relationship between a household’s income and the value of the property in which they live.
A tax system meets the test of adequacy if it provides enough revenue to meet the demand for public services, if revenue growth each year is enough to A self-balancing accounting structure with revenues, expenditures, assets and liabilities used to track monies flowing... means that taxpayers can avoid a maze of taxes, forms and filing requirements. Commending diversity in the tax system Arthur Young writes, “If I were to define a good system of taxation, it should be that of bearing lightly on an infinite number of points, heavily on none”. Economic fluctuations have been a big problem in the developed countries and for reducing these fluctuations taxation can play a useful role.
An excessive dose of deficit financing is bound to raise prices which are harmful for the society. When I say a tax system could be optimal, I mean two things by that. The cost of collecting a tax should be very small in relation to the amount collected.
If the tax system fails to yield enough resources, the Government will resort to deficit financing. Vertical equity involves classifying taxes as : A tax is regressive if those with low incomes pay a larger share of income in taxes than those with higher incomes. Rules are well known and fairly simple; forms are not too complicated; the state can tell if taxes are paid on time and correctly, and the state can conduct audits in a fair and efficient manner.
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