What are the various ways in which a good tax system affects the economy?

What are the various ways in which a good tax system affects the economy?

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Expert Solution

A good tax system has a positive effect on the economy of any country.

1. Increase in tax collection - A good tax system reduces the rate of tax evasion which increases tax collection and thus plays a positive role in the economy of a country.

2. Positive impact on economy due to reduction in income inequality- Good tax system will increase tax collection and the government will use that tax in the place where there is shortage of system and after this use, people will get appropriate opportunities and that tax collection Will help in positive impact in the country's economy.

3. Positive impact on economy by budget- Good tax system will increase tax collection by reducing tax evasion rate and the government will be able to construct a good budget which will bring positiveness in the country's economy. People will get appropriate opportunities, unemployment rate will decrease, trade will increase, domestic traders of the country will expand their trade abroad, thereby increasing the country's forex reserves.

Rahul Sunny answered 1 year ago

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