How Does Paying Taxes Help in the Development of the Country?
Before Starting, You Need to Understand What a Tax is
Taxes are mandatory financial charges the government sets on individuals and businesses within its jurisdiction. These charges are levied on income, property, goods, and services and are used to finance government programs, services, and infrastructure projects. Taxes help pay for critical public goods and services such as education, healthcare, transportation, infrastructure, and national defence. They also fund social welfare programs that provide support to vulnerable groups such as the elderly, the disabled, and the poor.
Taxes are an instrumental source of revenue for any government, and the amount and type of taxes vary from country to country. You can consult a tax refund company to guide you in your tax papers and refunds.
In General, Taxes Can Be Divided Into Two Categories:
Direct taxes
Indirect taxes
Direct Taxes:
Taxes that are paid directly to the government by individuals or businesses are called direct taxes. These taxes are proportional to the income or wealth of the individual or businesses, i.e., the higher the tax they will be required to pay. Examples of direct taxes include income, corporate, wealth, and property taxes.
Advantages of direct taxes:
● Direct taxes are more equitable as they are based on one's income or wealth.
● Direct taxes are more predictable than indirect taxes, as they remain constant regardless of the price of goods and services.
Disadvantages of Direct taxes:
● Direct taxes may harm investment or business activities, as businesses may be disincentivized to expand or invest when tax rates are high.
● Direct taxes can lead to an increase in tax evasion, as individuals and businesses may resort to hiding their actual income or assets to avoid taxation.
Indirect Taxes:
Indirect taxes are imposed indirectly on goods and services. Indirect taxes normally are implanted in the price of the goods or services and are paid by the consumer. Examples of indirect taxes include sales tax, value-added tax, excise duty, and goods and services tax (GST).
Advantages of Indirect Taxes:
● Indirect taxes are manageable to assemble and pay at the purchase point.
● Indirect taxes generate significant revenue for the government as indirect taxes are levied on a broad range of goods and services.
Disadvantages of Indirect Taxes:
● Since the poor consume a higher proportion of their income on goods and services, indirect taxes are regressive and affect them more than the rich.
● Indirect taxes are unpredictable as they fluctuate with the price of goods and services.
The Following Are Some Points on How Taxes Help in the Development of the Country:
● The income brought about by taxes is vital for the government to undertake colonial welfare programs, infrastructure projects, and other developmental initiatives. Taxes are a way of distributing the burden of financing the country's development to its citizens equally. A country cannot rely solely on aid or external financing to promote economic growth and development.
● When people pay taxes, the government has a reliable source of revenue that the government can use to furnish necessary services and programs, such as healthcare, education, and social services. It helps strengthen the colonial fabric of the country by providing access to essential services to all its citizens, regardless of their economic status.
● Another way taxes aid in the progress of a country is by promoting economic growth. Taxes provide necessary funds that stimulate investment in infrastructure, creating jobs and business opportunities. It helps the country's economy grow, leading to better employment rates, higher wages, and increased output.
● Taxes are essential to developing a country's infrastructure. Infrastructure is the backbone of any country's development, mandated for social and economic growth. By financing infrastructure projects such as roads, airports, and communication networks, taxes help create a favourable atmosphere for investment and business development. It leads to economic growth and increased job opportunities for citizens.
● In addition, to providing funding for essential services and infrastructure, taxes also play a role in promoting good governance. With taxpayer funds used to finance public initiatives, citizens can hold their elected officials accountable. Government officials must use taxes appropriately and effectively, and those who do not will be held responsible. Paying taxes promotes transparency, accountability, and the rule of law, which is essential for any country's outcome.
● Taxes play a critical role in a country's development. To ensure continued growth, citizens must understand the importance of paying taxes and working together to help build better societies for everyone.