Role Of Tax In The Economic Development Of A Country

Moreover direct taxes especially taxes on income are a minor source of tax revenue compared with indirect taxes. Role of taxation in financing economic development.

Importance And Role Of Taxation Taxes Economic Growth

role of tax in the economic development of a country

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Yet in practice it is hard to completely separate the analysis of the overall tax burden from that of tax structure.

Role of tax in the economic development of a country. Taxis the most important source of public revenuethe imposition of tax leads to diversion of resources from the taxed to the non taxed sector. The 2002 monterrey consensus for instance which launched a new focus on development recognised the key role of taxation in mobilising domestic resources 90 of domestic revenue is usually derived from tax. The objective of this study is to investigate the impact of taxation on economic development of nigeria proxy by the gross domestic product gdpthe study further looked at the relation between.

Optimum allocation of available resources. Hence there needs to be increasing discussion of the role of tax revenue in international development because it is a vital yet often absent component of advancement. Taxes are employed to garner as much resources as possible to finance the programme of economic development.

The proportion of the population that pays income tax in developing countries is correspondingly low averaging about 10 compared to the vast majority of the working population in developed countries which constitutes between 20 to 40 of the total population. Others claim that if we reduce taxes almost all of the benefits will go to the rich as those are the ones who pay the most taxes. Tax structures could best be designed to promote economic growth is a key issue for tax policy making.

Advocates of tax cuts claim that a reduction in the tax rate will lead to increased economic growth and prosperity. The current situation shows that low income countries typically collect taxes of between 10 20 percent of gdp while the average for high income countries is more like 40 percent. Indeed rich and poor country governments have agreed on the importance of tax for development for years.

Since most of the ldcs are characterized by ill organized money market a great importance is attached to the fiscal policy particularly taxation policy for the mobilization of internal resources. One of the most commonly discussed issues in economics is how tax rates relate to economic growth. Countries that have a relatively high level of taxes may also have a tax.

The revenue is allocated on various productive sectors in the country with a view to increasing the overall growth of the country. Developing countries are more prone to having multiple rates along sectoral lines including the complete exemption from tax of certain sectors especially the parastatal sector than industrial countries possibly as a legacy of past economic regimes that emphasized the states role in resource allocation.

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