If there’s one thing a lot of people hate to do is pay taxes to the government. If this were voluntary, very few people would pay their taxes to the government. For this reason, many people don’t really see the importance of taxation, but they only see the government as an institution bent on sucking every drop of blood out of them until they die. In this article, we’ll look at the purpose of taxation, so that you can better understand the role you play by paying your money to the government.
Source of Government Revenue
The first reason why society has taxes is simply because the government needs money to stay afloat. And although there are a number of governments in the world that rely heavily on other sources of income such as investments in companies and so on, the income from taxation is one of the most reliable, and it is the one that governments use the most for them. expenditure. From that money, they were able to build roads, schools, hire officials and so on.
Resource Redistribution
Another reason why governments levy taxes on their citizens is because these governments want to use taxes for the purpose of redistribution of resources. As most people already know, one of the most important principles of taxation is the principle of equity. In this sense, you will find that the government can get money from the rich and then use it to pay the poor some unemployment benefits.
Economic Policy
Finally, the government can also make very good policies just by messing with the tax system. If governments want to reduce aggregate demand in the economy, they can do so by ensuring that they impose very large taxes on the people to avoid inflation. On the other hand, if governments want to ensure that there is an increase in aggregate demand, they can do so by reducing the amount of direct taxes so that taxpayers have the opportunity to spend their money on commodities.
It is important to note that the objectives outlined here are not stand-alone policies. In the end, those with different goals will be able to interact with each other.