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 [...]
The following points highlight the four major economic effects of taxation. The effects are: 1. A redistribution of income 2. A raising of prices 3. A reduction of incentive 4. A reduction of enterprise. Effect # 1. A Redistribution of Income: This effect is felt most in developing countries. A proportional tax will not affect the distribution of income, but [...]
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 [...]