The Purpose Of Taxation

If there is one thing that a lot of people hate doing is paying their taxes to the government. If this thing were voluntary, then very few people indeed would ever pay their taxes to the government. For this reason, a good number of people do not really see the importance of taxation, but they just see the government as this institution that is bent on sucking from them every single drop of blood until they drop dead. In this article, we are going to look at the purposes of taxation, so that you yourself can be better informed on the role that you are playing by paying your monies to the government.

Source Of Government Revenue

The first reason why societies have taxes is simply because of the fact that the government needs money for it to stay afloat. And although there are a number of governments in the world which heavily rely on other sources of income such as investments in corporations and so on, the revenue from taxation is one of the most reliable, and it is the one that most governments use for their expenses. From this money, they are able to build, roads, schools, employ officials and so on.

Redistribution Of Resources

The other reason why governments levy taxes on the citizens is because these government want to use the taxes for the purpose of redistribution of resources. As most people already know, one of the most important principles of taxation is the principle of equity. In this sense, you will find that the government can get money from the rich and then use it to pay the poor some unemployment benefits.

Economic Policies

Lastly, the government can also come up with very good policies by simply playing about with the taxation system. If the government wants to reduce the aggregate demand in the economy, it can do so by ensuring that they tax the people very much to avoid inflation. On the other hand, if at all the government wants to ensure that there is increased aggregate demand, they can do so by reducing the amount of direct taxes so that the taxpayers can have the opportunity of spending their cash on commodities.

It is important to note that the purposes that have been mentioned here are not juts stand-alone policies. At the end of the day, they different purposes will be able to interact with each other.