What is Taxation System?
A taxation system is a system in which the government of a certain country asks for money from its residents and use that money on different things including health, education and defence purposes etc. In simple words, taxation is money that people have to pay as taxes on things provided by the government or government authorities.
Almost all countries of this world implement this system. However, implementation depends on the government policies. The main reason for this application is to increase the revenue for the government to spend on different expenditures and to perform/provide common services for residents of that country. It is also a kind of source of income for the government. Implementation of tax depends on the sale and purchase of different things. It also applies to private businesses like airlines, the textile industry etc
Why it tax collected?
People pay taxes under different categories. This makes sure all residents are liable to pay a specific amount depending on the accessories they are carrying. Different types of taxes include income tax; which is payable on Federal, State or local levels. Then comes sales tax; which is liable for the production of goods and services purchased. Also, people have to pay an excise tax, payroll tax, property tax, gift text, and state tax etc.
The money collected from this type of campaign help the government manage different activities for the public that includes spending money on welfare and development projects, defence expenditures, insurance of public, scientific research projects, payments and salaries of government and state employees, public transportation and operation of the government etc.
Flaws in activities while collecting tax make the entire taxation system defective, different causes are messing up with the scenario.
It has severe effects on the progress and growth of a country. Almost 51% of financial needs are covered using income tax received payment. Every government have a post of income tax officer who’s only working to get taxes from the public. If the government would not be able to get taxes from people it will become more difficult for it to manage facilities for its public and work properly. There are different causes of the flawed taxation or defective taxation system and their effects that are explained below:
1. Unpaid taxes:
It is the responsibility of the government to collect money from all the people who are liable to pay, it would be its weakness if the tax collection team is unable to get the money. Hence unpaid taxes are one of the most dangerous facts that affect the economy of the government. In this case, it is not only a loss of the government but also of the people who are paying taxes as compared to non-paying ones.
2. Missing information of tax liable items:
As already discussed that government needs to gather all the money from taxes. But before going to that, complete information of taxable items is necessary to have in the pocket. As you cannot ask anyone to pay without knowing their concerns. This is why there exist a lot of defects in tax collection due to missing information of text liable items. It must be checked before asking someone for payment of tax or making them liable to pay. Moreover, it is also the responsibility of the taxpayer to acknowledge his belongings and pay before asking/requesting by the government so that time of both parties could save.
3. Poor tax policies:
There happen many cases where observation of defects is common due to poor policies by the government. In developing countries, people usually don’t trust their government it and its policies. By this disbelieve, they don’t want to contribute to the government economy and want to hide from tax payments. If tax collectors work on policies improvement then the defective taxation system can improve and work much better.
4. Lack of honesty in tax payment:
It is also a matter of fact that taxpayers are sometimes dishonest while it is about tax payment. It is their moral duty to abide by the rules suggested by the government. But their dishonest opinion, behaviour and lack of education make them try different tactics to get rid of this payment. This type of behaviours simply put devastating effects on the government earning and it becomes difficult to carry on its activities and move smoothly.
5. Misappropriation of tax payments:
Another very important and miss conceptual point that happen after tax collection by the government is the misuse of tax payments. If the government will not utilise the collected money on proposed matters, people would not believe them and would try not to pay their taxes. In the meantime, tax money will not be used on useful things. In other words, misappropriation of tax payments would through severe results and affect the financial condition of the country.