Taxation

Running Head : Taxation

Taxation (Name (Institution (Name of Instructor (Course Subject

Taxation

Taxation is a system of producing money to fund or support the government wherein the government obliges the payment of money as taxes from the people , and is considered as an important instrument to uphold or keep stability of a nation 's economy . Tax revenues are utilized to pay police , build roads and bridges , grant food to the poor people , run and manage public schools , give medical care and benefits to the elderly , protection of property , public works , social

engineering pensions , unemployment benefits , water and waste management , health care systems , and many more , and without it , government could not exist Taxation is the most essential source of revenues for the government ranging from 90 or more of their incomes while the others comes from charging fees for services and borrowing to other countries or to international institutions like the world bank . Aside from using taxation to raise money , the government may also increase or decrease taxes to acquire the economic and social objectives . Government uses different kinds of taxes to distribute the tax burden among classes or individual involve in the taxable activities , and in addition , taxes are imposed to finance and support military and foreign aid and to help the macroeconomic operation of the economy by making some classes of transaction more or less appealing . The resource gathered from the public in taxation is always higher compared to the amount which can be utilized by the government , and the discrepancy or the difference is known as compliance cost such as labor cost acquired with taxation . It is said that all taxation creates what is known as market distortion which result in economic efficiency

Economist says that if a tax is extreme enough , it can eliminate trade in the taxed market and if the activity is making harm and decreasing that activity makes positive benefits to the society , a tax could facilitate in reducing that activity (University . In economics , there are many types of taxes and some of these are , direct taxes like in income taxes and taxes on property , indirect taxes like taxes on the expenditure on goods and services , special sales taxes or a fixed amount in pence per unit sold , and ad valorem taxes or the fixed percentage of the value of the commodity . A marginal tax on the manufacture of the goods will move the supply curve to the left until two supply curves is equivalent to per unit tax , and when other things remain equal , this will increase price paid the consumers and decrease the price received by the producers

If the demand is highly inelastic therefore the consumer is more likely to pay more of the tax while if the demand is elastic , therefore producer is more likely to pay more of the tax . And , if the tax revenue is higher , the more inelastic is the demand , in contrast with , if the tax revenue is lower , the more elastic is the demand...