But it is not the only goal. Taxation is a means by which governments finance their expenditure by imposing charges on citizens and corporate entities. The main purpose of taxation is to accumulate funds for the functioning of the government machineries. There are certain things a State can not do. Another reason is that taxation assists in reducing consumption of unwanted goods. The national government also spends the earned revenue for the justice system and regulation. Learn more about taxation in this article. Taxation is a means by which governments finance their expenditure by imposing charges on citizens and corporate entities. Learn how your comment data is processed. Your email address will not be published. Taxation, imposition of compulsory levies on individuals or entities by governments. Understanding Taxation . Shmoop breaks down finance concepts for all ages. Higher taxes on such goods reduce the consumption as the price of the product will be very high for the consumers. Taxation is differentiated from other forms of payment, such as market exchanges, in that taxation does not require consent and is … This site uses Akismet to reduce spam. What is the importance of taxation? Government also uses taxes as a way to protect local industries and as such make them more profitable. All governments in the world cannot run its administrative office without funds and it has no such system incorporated in itself to generate profit from its functioning. Taxes are charges levied against a citizen’s personal income or on property or for some specified activity. All governments in the world cannot run its administrative office without funds and it has no such system incorporated in itself+ Read More Case Study: Causes of the Recent Decline of Tesla, Looking After Your Well-Being When Traveling for Work, PRINCE2 Methodology in Project Management, Kerzner Project Management Maturity Model (KPM3), levied against a citizen’s personal income, Case Study of McDonalds: Strategy Formulation in a Declining Business, Roles and Responsibilities of Human Resource Management, Interview Method of Data Collection in Research, Nature and Importance of Managerial Principles by Henri Fayol, Different Products and Services Offered by Banks. Importance of Taxes in Society. Maintaining a standing military seems to be one. Typically governments use tax money to support expenses related to building and technology infrastructure, military programs, public safety, environmental protection and education. Taxation is a means by which governments finance their expenditure by imposing charges on citizens and corporate entities. Encyclopaedia Britannica indicates that the primary purpose of taxation is to allow a government to allocate resources as necessary. Therefore, it can be well understood that the purpose of taxation is very simple and obvious for proper functioning of a state.
Everything you ever wanted to know about The Purpose of Taxes, in a way that you'll actually understand. The main purpose of taxation is to accumulate funds for the functioning of the government machineries. Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well. Explaining the Primary Purpose of Taxation. Your email address will not be published. Required fields are marked *. Without taxes, governments would be unable to meet the demands of their societies. Taxes on imports, which are called tariffs, can be used by government to correct an unfavorable balance of payment situation by increasing the tariffs. Without taxes, government contributions to the health sector would be impossible. The money that is raised from various taxes is spent by the government for the construction of schools, roads, hospitals and also for other development causes.
Case Study of Dell: Driving for Industry Leadership, Case Study: iPod, Apple’s Best Innovation. ADVERTISEMENTS: Objectives of Taxation: The primary purpose of taxation is to raise revenue to meet huge public expenditure. Most governmental activities must be financed by taxation. Taxes as such can be used as an effective tool to reduce the consumption of unwanted goods like alcohol. In other words, a government can run its administrative set up only through public funding which is collected in the form of tax. Increasing tariffs on imports and charging lower taxes to local products may boost the demand for goods and services produced by domestic industry. Truly speaking, in the modern world, taxation is used as an instrument of […] Taxes are crucial because governments collect this money and use it to finance social projects. As such, one purpose of taxation is to increase in effectiveness and productivity of the nation as government is able to implement various socio-economic development projects such as the construction of roads and bridges, schools, health facilities and provision of social services.