Tax revenue-Meaning,Definition,Features and Objectives
Tax revenue is the income that is gained by governments through taxation.To meet the increasing public expenditure public authorities raises resources through public revenue. There are several sources of revenue and one among them is taxes.Tax is a compulsory payment by the citizens to the government to meet the public expenditure. It is legally imposed by the government on the tax payer and in no case tax payer can deny to pay taxes to the government.
“A Tax is a compulsory payment made by a person or a firm to a government without reference to any benefit the payer may derive from the government.”
“A Tax is a compulsory contribution imposed by public authority,irrespective of the exact amount of service rendered to the tax payer in return and not imposed as a penalty for any legal offence.”
Features/Characteristics of a Tax
A tax is a compulsory payment to be paid by the citizens who are liable to pay it. Hence, refusal to pay a tax is a punishable offence
2. Public Welfare
Tax revenue is spent for the general and common benefit e.g. the construction of a hospital and railway line,supply of water and electricity, etc. It does not benefit any single individual in particular,rather entire society is benefitted by it.
3. No direct Service
The tax payer does not get any direct service as quid-pro-quo. In other words,the tax is not in any way related to the benefit received from the government expenditure and the tax payer cannot expect any benefit from the government in proportion the tax paid by him But this is not true in all cases as there are certain taxes from whom the collected revenue is spent on those persons from whom these taxes have been collected.For example,the major portion of the revenue collected from road tax or petrol tax is spent on the repair and upkeep of roads.
4. No proportionate relation between the tax and the benefit
It is also not necessary that a tax payer gets the benefits form the government proportionately to the amount paid by him as tax.Thus taxes are not paid because an individual receives a benefit from the government or are taken from him because the government has rendered any services to him.But there are certain qualifications to its, e.g. a land tax is paid only by those individuals who possess land or derive benefit from land.Similarly entertainment tax will be paid by only those who receive the benefits.
5. Personal Responsibility of an Individual
Tax has to be paid by a person even though the basis of its imposition may be goods.In other words a tax imposes personal obligation on the tax payer.
6. Legal Procedure
Taxes are imposed legally and properly.Taxes are levied according to legal procedure.
Objectives of Taxation
1. To get Income
The fundamental objective of taxation is to finance government expenditure. The government requires carrying out various development and welfare activities in the country. For this, it needs a huge amount of funds. The government collects funds by imposing taxes. So, raising more and more revenues has been an important objective of tax.
2. To regulate and Control
Taxation also aims at regulating consumption,imports,exports,profit etc. For example,in order to control or prohibit the consumption of liquor or other intoxicants government imposes heavy taxes on these goods.Similarly goods whose imports are to be discouraged are burdened with heavy import duties.
3. Prevent Concentration Of Wealth In A Few Hands
Tax is imposed on persons according to their income level. High earners are imposed on high tax through progressive tax system. This prevents wealth being concentrated in a few hands of the rich. So, narrowing the gap between rich and poor is another objective of tax.
4. Boost Up The Economy
Tax serves as an instrument for promoting economic growth, stability and efficiency. The government controls or expands the economic activities of the country by providing various concessions, rebates and other facilities. The effective tax system can boost up the economy. Similarly, taxes can correct for externalities and other forms of market failure (such as monopoly). Import taxes may control imports and therefore help the country’s international balance of payments and protect industries from overseas competition.
5. Allocation of resources
Change in the allocation of resources is another objective of taxation.If government wants to withdraw the resources from the production of luxuries and utilize the same for producing more of necessities,it imposes heavy taxes on luxuries and remove taxes from necessaries.As a result of more taxes on luxuries their prices rise and demand falls.Less demand means less production of these goods and less use of resources.These resources can be used for the production of necessities.
6. Control over prices
Taxation alos increase the rise in prices.One of the causes of price rise is the expansion of the supply of money.when there ismore money with the people there is more demand and hence rise in prices. Through taxes,government reduces the voulume of money with the people.Consequently,there is fall in demand and also fall in the price level.