Benefits of Taxation
Governments charge taxes from taxpayers so that they can regulate the funding of social welfare programs and ensure a holistic development of the country. the Indian government introduced the Income Tax Act in 1961 and it regulates a normal taxpayer. The recent tax reform was made in 2017 when the goods and services tax was introduced to facilitate businesses and provide them with a unified tax system. This article will delve deeper into the benefits of taxation and its major role in facilitating social welfare policies.
Contribution of Taxation in Social Welfare Policies
Ideally, the objective of social welfare policies is to reduce inequalities and a better life for the poor population. Programs under social welfare policies are supported financially by the revenue generated from taxing the people of the country.
1. Healthcare Programs: Public healthcare facilities, drug subvention schemes, and immunization drives.
2. Education Schemes: Free or subsidized education, scholarship, and vocational courses.
3. Housing Schemes: Affordable housing and rental subsidy schemes.
4. Social Security: Pension, unemployment allowance, and disability pension.
Positive Impact of Taxation
This is the main source of revenue for the Indian government whether central or state. Taxes help governments pool resources from individuals and businesses to fund public goods and services. Some of the key reasons why taxation is central to social welfare are as follows:
- Predictable and Sustainable Revenue: Paying taxes provides a steady source of revenue that is predictable, and critical for long-term planning.
- Redistribution of Wealth: Progressive taxation systems ensure that rich people pay proportionate amounts of money, addressing issues of inequality.
- Accountability and Public Participation: Tax-paying citizens have an interest in how the government spends its money, thus a motivation toward accountability and transparency.
In the absence of tax, the government has to rely on other funding streams, which may not be as reliable or even-handed.
What Happens If Government Stops Taxing Taxpayers?
If governments stop taxing eligible taxpayers, it is going to affect the economy negatively as the taxation makes up most of the revenue.
1. Economic Inequality
Without taxation, funding mechanisms may unduly burden the poor. For instance, indirect taxes or fees could increase inequality because both indirect taxes and fee payments more heavily weigh on the lower-income classes than on the rich.
2. Unpredictability
Alternative funding sources such as donations or international aid are usually volatile. Being subjected to the international economic situation and other donor priorities, they can’t be trusted as a steady source for welfare programs, therefore, making taxation more reliable.
How to Incentivize Taxpayers to Pay Taxes Â
1. Strengthening Tax Systems:
- Â Better enforcement against tax evasion and avoidance
- Expand the tax base by formalizing informal sectors
2. Progressive Taxation:
- Have the wealthier units of individuals and corporations pay their due.
- Reduce reliance on regressive taxes like sales taxes, which are highly prejudicial to the less well-off.
3. Public Engagement:
- The country’s government should ensure the confidence of the public in getting the tangible effects of taxation.
- Encourage the public in budget preparation and specific policy implementation decisions.
Get Started with TaxDunia
Taxation plays a significant role in economic development and funds social welfare policies. It is complemented by other sources of revenue but cannot be replaced as it contributes the most. Taxation not only benefits the government by increasing the revenue but also offers taxpayers various benefits. The government launches several kinds of welfare programs and development projects for small and medium enterprises. It also offers subsidies and supports businesses in critical times. Reach out to TaxDunia to file your taxes on time and get business support.
