The role of taxation on a developing country. Tax and developing countries 2023-01-07

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Taxation plays a crucial role in the development of a country, particularly a developing one. It is a key source of revenue for the government, which can be used to fund various development initiatives such as infrastructure projects, education and healthcare programs, and social welfare schemes.

In a developing country, where the government may not have sufficient resources to fund these initiatives, taxation can help bridge the gap. By collecting taxes from the citizens, the government can generate the necessary funds to invest in the development of the country.

However, taxation can also have negative impacts on a developing country if it is not implemented and administered in an equitable and efficient manner. High tax rates can discourage entrepreneurship and investment, leading to a slowdown in economic growth. Similarly, if the tax system is complex and burdensome, it can discourage compliance and lead to widespread evasion, resulting in a loss of revenue for the government.

To ensure that taxation plays a positive role in the development of a country, it is important that the tax system is designed in a way that is fair, simple, and transparent. This can be achieved through the implementation of progressive taxation, where higher income earners are taxed at a higher rate, and the provision of tax incentives and exemptions for certain sectors of the economy.

In addition, it is important that the government invests the tax revenue wisely, focusing on initiatives that will have a lasting impact on the development of the country. This could include projects that promote economic growth, such as infrastructure development and support for small businesses, as well as programs that address social issues, such as education, healthcare, and poverty reduction.

In conclusion, taxation plays a vital role in the development of a developing country. It is a key source of revenue for the government, which can be used to fund various development initiatives. However, it is important that the tax system is designed and administered in a way that is fair, simple, and transparent, and that the tax revenue is invested wisely in initiatives that will have a lasting impact on the development of the country.

(PDF) The theory of taxation for developing countries

the role of taxation on a developing country

So, in order to raise adequate resources for development, the govern­ment is forced to extend the coverage of indirect taxes on mass consumption goods. For this reason government has proposed to increase the time limit from 5-7 years to 10 years which will be enacted from 1st January. To get the benefits of tax exemption, richer people invest their surplus funds in tax-free bonds, or in life insurance policy programme, etc. Overseas Sector Producer Investment BANKS7 Government Spending Taxation Net Export Savings Consumer Spending HOUSEHOLDS GOVERNMENT SECTOR FIRMS Taxation Transfers Factor Income Disposable Income FIGURE 1: CIRCULAR FLOW OF INCOME HIGHLIGHTING THE TAX POINTS Source: Faculty of Business Studies, 2010 Taxation has a key role in a modern economy. H i: The role of taxation does not help in economic development and planning. Without taxes it would be impossible for governments to raise money to fund these types of projects.


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THE ROLE OF TAXATION IN AN ECONOMIC DEVELOPMENT AND PLANNING, A CASE STUDY OF OGBOMOSHO NORTH LOCAL GOVERNMENT

the role of taxation on a developing country

But between taxation and borrowing, taxes are better than borrowing from a long term point of view. Taxation can be collected from a number of sources diagrammatically shown in the circular flow of income figure. To encourage the growth of the local motor cycle industry it has been proposed to enhance the supplementary duty rate on both completely built up CBU and completely knocked down CKD motor cycle from 20 percent to 30 percent. The higher the standard of living, the stronger and higher the level of consumption most likely is. This means that 81. When governments collect money from taxes, it ploughs this money into development of this infrastructure and in turn promotes economic activity throughout the country. Hence the necessity of borrowing.

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The Role of Taxation in Economic Development

the role of taxation on a developing country

Possible solution aimed of bringing about better economic development and growth using tax generated revenue are suggested. Thus, the scope for increasing tax revenue as a proportion of income may in practice is limited. Those who believe that insufficient growth and investment is mainly a consequence of a lack of resources, are chiefly concerned with increasing the resources available for investment through additional taxation even at the cost of worsening its disincentive effects. » GLOBAL RELATIONS The OECD Global Relations Tax Programme provides the platform for engagement and dialogue through 50-70 events per annum delivered globally on OECD tax guidelines, standards and good practices. It will be helpful for the economic development as people will be able to buy this type of everyday commodities and will consume more and will be able to save and invest. Protecting local Industry: — Local industries are normally protected by the government through the use of heavy import tariffs.

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Property Tax Role in a Developing Country

the role of taxation on a developing country

. Apart from social projects, governments also use money collected from taxes to fund sectors that are crucial for the wellbeing of their citizens such as security, scientific research, environmental protection, etc. Taxes are the most important sources of government revenue. The current New Zealand tax base is made up of the following taxes Hooper, K. Below are some examples of these initiatives: Roadmap The Global Forum has established aRoadmap which provides a stepped approach to ensuring developing countries can overcome obstacles in implementing the new AEOI Standard.

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The Role Of Taxation In An Economy Economics Essay

the role of taxation on a developing country

The direct taxes are progressive in nature. In a modern market-based economy like that of India, the balance be­tween direct taxes on income and indirect taxation on expenditure and trade is heavily weighted in the direction of the latter, particularly in the form of import duties and sales taxes. More than 70% of the tax revenue are from indirect taxes which is clear from the following table. Corrective Tax: -these have specific purposes such as promoting or discouraging certain behavior. In the light of this, the developing country can make use of the least exploited property taxes to encourage saving, steer economic growth and reinforce capital formation. In 2014, together with its regional partner organisations, the OECD published the third edition of Revenue Statistics in Latin America and the Caribbean and the first edition of Revenue Statistics in Asian countries.

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Role of Taxation in Financing Economic Development

the role of taxation on a developing country

Various base broadening policies will be implemented to finance the reduction in these rates. ADVERTISEMENTS: At the early stage of development, when the rate of raising is low, there is need for compulsion in forcing people to consume less and save more. Some countries have adopted a narrow tax base while others have favored the broad tax base. H i: Taxation is not promoting economic activities of a country. This is because computerized technologies can play an integral role in facilitating the property assessment and valuation, which will help in cutting the administrative costs associated with levying property tax.

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Economic development through taxation

the role of taxation on a developing country

From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. This will lead to broadening the tax base and also limit unfair tax advantages to property investors within New Zealand. Taxes are crucial because governments collect this money and use it to finance social projects. Kiwi Saver forms part of this as well. The focus on industrial development is an effective economic strategy that the developing can exploit to divert from the extreme reliance on agricultural sector. Lack of central planning is a key characteristic of this economic system, this in turn helps in encouraging foreign investment due to the liberal policies. This leads to tax avoidance.


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The Importance Of Taxes

the role of taxation on a developing country

With a view to encouraging local paper manufacturing industry, it has been proposed to extend the customs duty and value added tax exemption facilities granted earlier to the import of de-inking chemical and waste paper respectively for another year. Those who believe that it is the lack of adequate incentives which is mainly responsible for insufficient growth and investment are mainly concerned with improving the tax system from an incentive point of view through the granting of additional concessions of various kinds, with less regard to the unfavourable effects on the public revenue. Also, it is one of the instruments for boosting the potential of public sector performance and repayment of public debt. Companies need to review their current depreciation levels TaxRates. Learn More It is important to note that savings and levels of investments are indirectly proportional to the tax rates; this implies that higher tax rates are a significant hindrance to individual savings and will not serve as an incentive for foreign investment. Money from taxes is channeled to funding, furnishing, and maintaining the public education system.

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The Role of Taxation Problems on the Development of E

the role of taxation on a developing country

Currently a 20% depreciation loading on capital and land form part of the system. ADVERTISEMENTS: Further, investment pattern gets distorted following the high tax rate. So, the primary objec­tive of tax policy in such countries should be to transfer financial resources from the private to the public sector as much as possible with minimum adverse effect. This among traditional function of the government is the provision of collective of public goods i. But this method is viewed as a self-defeating one as it is an inflationary method of financing.

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Tax and developing countries

the role of taxation on a developing country

So, work effort, saving and investment in venture capital i. It means that businesses can expand their operations rather than striving to provide these services and infrastructures for themselves. Therefore, taxation helps to: Earn foreign exchange through the promotion of exports. Ensuring that property tax functions effectively in the context of the developing country is a significant challenge. Taxation is of great importance to any nation in its pursuit of self-reliance and in meeting its economic regulation needs.

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