IN ECONOMY
TAXATION
• It is a compulsory contribution
imposed by a public authority.
• It is the main source of income
for public authorities.
IMPORTANCE
1.Capital formation is important in all economic
model.
2.Principal methods of financing :taxation,
borrowings and foreign aid.
3.Means of resource mobilization, highly
dependable, no strings attached.`
4.Instrument for transferring purchasing power
from individual to government .
5. Flexible depending on the requirements.
DEVELOPING ECONOMIES
1.Problems related to economic growth, removal of
poverty and inequalities, chronic unemployment and
regional disparities for e.g. India
2. Tax policy to yield increased revenues to the
government, also conform to criteria of buoyancy
and elasticity
3. Equity and resource mobilizations dictate that the
tax burden should be evenly distributed between
sectors and individuals. e.g.agriculture sector.
4. Tax system to promote private savings and direct
them into investment in priority industries
( India having saving rate but low investment rate.)
CLASSIFICATION
Directly paid by the persons Indirectly paid by the
on whom it is legally imposed other persons
Indirect Taxes
J.S.Mill –“Indirect tax is demanded from the very
persons in the expectation and intention that he
shall indemnify himself at the expanse of others
COMPARATIVE STATUS
1950-51 1990-1991 2003-04
Direct tax 43% 16% 38%
Indirect Tax 57% 84% 62%
A variation in the rate of tax with When tax rate rises with an increases
variation in the amount on in income,etc graduate is upwards
income,property,etc and is known as progressive taxation
It has forms :Step system and Sad
system