Question

1. Discuss the general purposes of taxes? Give examples.

2. How politically popular is it for government to reduce spending and/or to raise taxes? Explain.

Answer 1

Taxes and its purpose

Any government for its functioning requires funds so that the growth of facilities such as police, defines, health care, education etc can be carried out smoothly. Further, for vulnerable sections of the society, the government must provide employment opportunity as well as basic necessity goods at a relatively lower price than normal markets. Therefore, to allow for government expenditures as well as subsidies, the concept of taxation came into existence.

it is aimed at collecting money from those, who use government services or others who earn well for themselves or purchase goods and services to facilitate expenditure and growth for an economy.

Generally speaking, the tax rates in underdeveloped and developing countries is relatively higher as social conditions and economic conditions requires such strict measures.

Politics and Taxes: -

The above was the economic reasons for the implementation of taxes across different economies. On the contrary, it is not popular for governments to reduce spending or to increase taxes. The major reason for this is that it adds burden to a lot of people and the government may not succeed in winning next elections.

When political conditions are unstable it becomes tougher for countries to be able to raise taxes or reduce taxes. This is done only when economic conditions give no other option as in the case for high inflation levels.

Please feel free to ask your doubts in the comments section if any.