Monday, August 12, 2013

Role of Tax in National Development

A tax is a compulsory payment or contribution made by the citizens of a country to the government for the general benefit of the country. There are two main systems of taxation levied by the government which are direct and indirect taxes. Examples of direct taxes are personal income taxes, company taxes, capital gain taxes, toll taxes, poll taxes gift taxes and property taxes to mention a few. Indirect taxes on the other hand include Value Added Taxes (VAT), Tariffs, and import and export duties. Thus taxes of all form could be levied to achieve national goals such as economic stability, equity, economic growth and protectionism. It could as well be employed to mobilize revenue into the nation coffers as reserves.

On the economic stability for example, wild fluctuations (ups and downs) in prices are very harmful for the development of the economy of the country. Declining prices for example, as witnessed during the recent Global Financial Crisis, cause depression which leads to a fall in company profits, saving, investments, employment and the Gross Nation Product (GDP). Conversely, constant rising prices (inflation) do not only create problems of discouraging savings, it makes people with fixed incomes suffer and worsens a country’s balance of payment as well as weakens incentives to improve efficiency on the part of entrepreneurs. When inflation is not checked, it becomes severe and eventually leads to the collapse of a country’s entire economy.

It is time to push for economic growth to improve upon the standard of living of our people to make inequity in the distribution of income more tolerable. Surely economic growth will also provide the challenge and causes a sense of achievement to distinguish a vibrant from a stagnant economy as was seen in the second half of the previous administration.

No comments:

Post a Comment