Objectives (Aims) of taxation (Fiscal policy) in an Economy/ Why is it necessary to levy tax in your country
- To rise government revenue so as to meet her recurrent and development expenditures.
- To achieve equitable distribution of wealth and incomes by using progressive tax system where the tax rate increases with an increase in the tax payer’s income. ‘
- To protect the local in/an industries from unfair foreign competition through the use of high import taxes.
- To control inflation by increasing tax rates on individual’s incomes in order to check on aggregate demand in the economy
- To achieve balance of payment stability. This is done by discouraging imports inform of high import duties and encouraging exports by subsiding the exporters.
- To control monopoly powers. The monopolists are highly taxed while other firms are subsidized to allow fair competition.
- To discourage the production and consumption of harmful products for example drugs, cigarettes etc. This is done by imposing heavy taxes on the producers of those commodities.
- To reduce over dependency on foreign aid and borrowing. Taxation helps the government to generate revenue locally.
- To promote individual responsibility and self-reliance among the citizens as they have to work hard in order to pay taxes
- To allocate and regulate the use of resources in order to achieve optimum production. This is because the government revenue can be used to set up productive ventures which can be used to benefit the whole society e.g. social and economic infrastructure.
- To ensure steady economic growth and development through increased investment and production. This can be achieved by manipulating the fiscal policy e.g. giving tax holidays and exemptions to the investors.
- To reduce population growth rate in case the tax is based on the number of children born by a given family.
CATEGORIES Economics
TAGS Dr. Bbosa Science
