Tax policy plays two important roles in financing economic development. One is to maintain an economy at a higher employment level so that the saving capacity of the people is raised with an increase in income per head. The second is to raise the marginal propensity to save of the community as far above the average propensity to the maximum [...]
1. Canon of Ability: The State is necessary for all - rich and poor. Without the State, nobody's life or property is safe. So, everyone is required to pay taxes to meet the expenses of the State. But a person who earns Rs.10, 000 a year does not have the same taxable capacity as the person who earns Rs.100, 000 [...]
The following points highlight the top five factors determining the scope of taxable capacity. The factors are: 1. Income 2. The rate of taxes 3. The way the resources are used 4. The attitude of the people 5. Special circumstances. Factor # 1. Income: The level of income is no doubt the primary determinant of taxable capacity. But its nature [...]