Purpose of taxation Secondary purposes • To reduce inequalities in wealth and income by imposing progressively higher taxes. To prevent inflation by increasing taxes or ward off depression by decreasing taxes.

What is benefit principle of taxation?

The benefit principle is a concept in the theory of taxation from public finance. It bases taxes to pay for public-goods expenditures on a politically-revealed willingness to pay for benefits received. The principle is sometimes likened to the function of prices in allocating private goods.

Who exercise power of taxation?

SECTION 8. Clause 1. The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.

What are the functions and objectives of taxation?

Functions and Objectives of taxation Matsiko Godwin Muhwezi The original aim of taxation was to provide the revenue necessary to fund state functions. At present this is only one of several aims, because the tax system is now also used for broader socio- economic purposes.

Which is a short run objective of taxation?

Objective # 3. Price Stability: Thirdly, taxation can be used to ensure price stability—a short run objective of taxation. Taxes are regarded as an effective means of controlling inflation. By raising the rate of direct taxes, private spending can be controlled.

What are the principles of a good tax system?

A good tax system is therefore based on some principles. Adam Smith has formulated four important principles of taxation. A few more have been suggested by various other economists. These principles which a good tax system should follow are called canons of taxation. 15.

Why is tax an important source of revenue?

Tax is permanent instrument for collecting revenues. It is a major source of revenue in the developed world and has been appearing as an important source of revenue in the developing world as well. It has been an instrument of social and economic policy for the government. The main objectives of tax are as follows: 1. Raise More Revenue