Taxation - Tax Laws

Name

Institution

Date

 Tax laws

Tax is a compulsory levy payable by an economic unit to the government without reference to a particular benefits received by the taxpayer (Staff, 2014). Tax is therefore distinguished from the price which is payable for the voluntary consumption of the goods and the services by the clients. Without direct connection between the benefits which are received and the tax payable, taxpayers regard taxation as a burden and thus taxation is a necessary evil.

Objectives of taxation

There are many objectives of taxation. The government of every country requires that taxes are paid so that the money collected can be used as a defense to give security to its citizens from external threats and from the internal threat (Smith, 2013). The money collected also is used for recruiting of army which they are providing security for the country.in addition , the money collected are used to pay teachers and the other employees that the government are employing to provide services to the citizen.

The other objective of taxation is any country is that the tax accumulated are used for development  of industries for example to help other sectors like agriculture by providing research and by offering subsidies for the  to use the money to improve their activities.

Another objective is to provide infrastructure by constructing roads in many places so that the goods and the services are transported into the market at the right time. This will assist the goods that are perishable to be availed in the market early enough. In addition, the money from taxation is used to supply electricity to the places that are required for economic development. These places include rural area through rural electrification so that the businesses that are only found in the urban areas can be also developed in the rural areas. This will assist a lot in rural development and the rural urban migration will be reduced because individuals who are going to the urban areas in search of jobs can now look for jobs in the rural areas.

The other objective of taxation is that the money is used for development of health and education is all palaces of the country some government is various countries are providing free education to these who are needy through this kind of money. The salaries to thee teachers are from the taxes. Also, the buying of drugs which are supplied to hospitals is done using the money from taxation. In addition, the tax is used to provide free health service by some countries in the public hospitals.

Environmental services like collection of garbage and ensuring that the forest is not destroyed. This is done through the taxes which are collected and the money can be used to hire individuals to go around educating people the importance of the protection of the environment and this will assist the people in understanding the need to protect it and used for other important uses which will assist them rather than destroying it and finally they suffer. In this case, the tax can be also used for plantation of trees in various places in the country.

The money is also used to develop social services which the people can visit to play games or to watch the players while they  are playing. This is very important so that the leisure time of the citizens can be utilized effectively for they can visit these places and enjoy themselves when they want.

The other objective of the taxes is to prevent overconsumptions of goods that are considered to be harmful so that the goods does not bring harm to the people. Examples of this goods is alcohol and the tobacco.

Redistribution of   labor is also done through the tax. This is because the when the rural areas are developed, the people in urban areas will go to the rural areas to look for jobs.

The other objective is to reduce inequity of incomes. The burden of the tax will be born by the rich more than the poor. This is because the tax is will be paid more by those rich people which they have the businesses than the poor which they don’t have any kind of the business. The money that will be collected will then be used to provide essential goods and the services and thus bringing equity of income distribution to the poor and the rich. The poor will then benefit from the social amenities that are provided by the government.

The other objective is that the government will use raise the revenue for it to finance its expenditure

Types of taxes

There are many times of taxes (Review, 2014). These are income tax, value added tax, excise duty which is charged to locally manufactured goods, custom duty which are levied for the goods that are imported, rates, withholding taxes which is deducted at the source and turnover tax.

Principles of taxation

Equity’s tax system should be reasonable and just so that the amount of the tax is determined by the rules rather than the negotiation or arbitrary procedures. The tax should be also based on the ability to pay and the equal taxation of the persons with the equal abilities to pay often referred to as the horizontal equity. The ability to pay is related to the economic capacity as measured by the income thus progressive tax system.

Economic efficiency is another principle of the taxation (Marshall, 2013). Taxation can damage economic efficiency by impairing productive capacity, reducing incentives and distorting the allocation of the resources, but carefully designed system can improve efficiency. The influence on economic incentives should be carefully considered in designing tax system. Taxes have two kinds of effects and this is substitution effects and income effect. Substitution effect is the reduction in the rate reward obtained by working, savings making innovations and carrying on other activities.it is more severe for progressive taxes than proportional and regressive taxes. Income effect is the reduction of the income caused by the taxation

Simplicity, this is the ability of the tax payers to understand the tax laws.it calls for the system which is simple enough to enable the payer to compute his own liability.

Certainty, the tax should be known by the payers and those who are collecting in advance. This will make the tax acceptable because the payers will prepare to collect the money that will be paid to the tax collector in advance and therefore he or she will not create resistance to the payment of the tax. There are four main aspects of certainty and these. Certainty of incidence tax authorities can predict the effect the effect the tax, certainty of liability which is concerns the ease and the certainty in which liability to tax can be assessed, evasion ratio which measures the certainty with which the government can extract the revenue from those liable to the tax and finally fiscal marksmanship. The authorities can predict the revenue that will fall due in the year in question. This will depend on their liability to forecast the value of the macro and the micro economic variable upon which tax revenue depend.