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Taxation: Tax and Government Expenditure Policy Essay

Taxation refers to the act of a taxing authority actually levying tax. Taxation as a term applies to all types of taxes, from income to gift to estate taxes. It is usually referred to as an act; any revenue collected is usually called “taxes.” The process whereby charges are imposed on individuals or property by the legislative branch of the federal government and by many stategovernments to raise funds for public purposes.

1. A tax (from the Latin taxo; “rate”) is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a stateor the functional equivalent of a state such that failure to pay, or evasion of or resistance to collection, is punishable by law. Taxes are also imposed by many administrative divisions. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent. 2. Compulsory monetary contribution to the state’s revenue, assessed and imposed by a government on the activities, enjoyment, expenditure, income, occupation, privilege, property, etc., of individuals and organizations.

Taxes are revenues of the government.
2. Through these, they be able acquire budget which could further use to build or improve consumption expenditures of the government, capital outlays, national defense, education, health and other social investments. 3. taxes are lifeblood of a nation. Without it, the country will always have insufficient funds which would sought them to always borrow money in World Bank or IMF. 4. taxes are also used to pay international debts.

5. the purpose of the tax is to bridge the gap between those with more in life and those who have less in life. 6. there is a type of tax which is called “sintaxes”. an example of it is the taxes levied to cigarettes. it is regressive in reference to tax burden (those in lower income ends up paying more) because primarily cigarettes are dangerous to ones health. it’s the government’s way to discourage people to smoke; but if a person can’t stop himself use his penny to puff cigarette, in one way or another the government resort to obtain income them because on the assumption that if they could afford it, therefore they have more in life. 7, by having taxes, the government could somehow gain protection for incurring large fiscal deficit. the impacts of fiscal deficit would lead the government print out so much money that will eventually lead to inflation. 8. borrowing from he domestic market would lead to “crowding out” with taxes the government could lessen the probability of this to happen. 9.tariffs, which is an excise tax levied upon foreign goods and service, is given to balance international balance of payments. 10. lastly, taxes are automatic stabilizers of a country.

Purposes of taxation

During the 19th century the prevalent idea was that taxes should serve mainly to finance thegovernment. In earlier times, and again today, governments have utilized taxation for other than merely fiscal purposes. One useful way to view the purpose of taxation, attributable to American economist Richard A. Musgrave, is to distinguish between objectives of resource allocation,income redistribution, and economic stability. (Economic growth or development and international competitiveness are sometimes listed as separate goals, but they can generally be subsumed under the other three.) In the absence of a strong reason for interference, such as the need to reduce pollution, the first objective, resource allocation, is furthered if tax policy does not interfere with market-determined allocations.

The second objective, income redistribution, is meant to lessen inequalities in the distribution of income and wealth. The objective of stabilization—implemented through tax policy, government expenditure policy, monetary policy, and debt management—is that of maintaining high employment and price stability. There are likely to be conflicts among these three objectives. For example, resource allocation might require changes in the level or composition (or both) of taxes, but those changes might bear heavily on low-income families—thus upsetting redistributive goals. As another example, taxes that are highly redistributive may conflict with the efficient allocation of resources required to achieve the goal of economic neutrality.

Purpose Of Taxation

Taxes are mainly used to finance the expenses incurred by government to manage an economy. These expenses include: health care, education, garbage collection and operating government business entities. Taxation is also used by government for several other purposes. a. To reduce pollution by taxing offending firms

b. To discourage unhealthy lifestyle e.g. a tax on cigarettes c. To protect local and infant industries by taxing imports
d. To achieve greater equality of wealth and income. Revenue from taxation is used to help the very poor e.g. providing food stamps.
e. To improve the balance of payments (BOP) by increasing the duties charged on imported goods.
f. To control spending in an economy thus reduce inflation


1. Levying of the tax- The imposition of tax requires legislative intervention. In the Philippines, it is Congress that levies the tax; 2. Collection of the tax levied. This is essentially an administrative function. The two processes together constitute the taxation system.

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