Advantages and disadvantages of taxation and legislation?
Answers
1. Advantages and Disadvantages of Taxation System advantages and disadvantages of tax system 1
2. What is taxation system? A world taxation system is a proposed system for the collection of taxes by a central revenue service. Taxation is a tool commonly used by government as a means of redistributing income amongst its citizens. In some instances, taxation can have a positive effect on the redistribution of income, other times, it can do more harm than good. In its sense taxation system has two types narrated next. advantages and disadvantages of tax system 2
3. Types of taxation: Direct tax: Direct Taxes are the taxes that are levied on the income of individuals or organizations. They include Income tax, corporate tax, wealth tax and inheritance tax. Indirect tax: An indirect tax is levied on goods or services, which increases the price of a good or services. The tax is actually paid by the end consumer, by way of a higher retail price. They include tax on cosmetics and other goods of daily use. advantages and disadvantages of tax system 3
4. Direct taxation: Advantages Disadvantages control inflation, Through increasing of various taxation rate, taxation can be used as the means of controlling inflation especially the demand pull inflation. Since raising of taxation rate of various commodity result into decrease in purchasing power of individual person hence being a solution to demand pull inflation. Reduce purchasing power, Taxation especially when the tax rate are high has the tendency of reducing the disposable income of an individual which subsequently reduce the purchasing power. advantages and disadvantages of tax system 4
5. Cont .. Advantages Disadvantages Discourage saving, Since taxation rate reduce the disposable income of an individual, this means an individual saving ability will be reduced. Hence from, this money can not remain in just few hands and it remains revolving. Discourage investment, Heavy tax rate on firm profit become disincentive for investor to invest on particular sector instead investors will opt to invest in other sector which their tax rate is of reasonable value. advantages and disadvantages of tax system 5
6. Cont .. Advantages: Disadvantages: Redistribution of income, Through taxation system especially the progression tax system taxation can be a means of ensuring fair distribution of income between individuals by imposing high tax rate for those who earn more and less tax rate for individual who has lower income, this also can lead to reduction of income gap between poor and rich people. The another disadvantages of a direct tax is that it is liable to be evaded. By submitting false returns, many people try to evade income tax. Unless the civic sense of the people is well — developed and there is spread of education among them, the administration of direct taxes is very difficult. advantages and disadvantages of tax system 6
Advantages of Legislation -
1) Legislation is the best and most reliable source of law
2) Statutory law is rigid and applicable irrespective of the crime
3) The modern States give more importance to the legislation.
4) Legislation makes new law to the society.
5) By legislation, social control is possible
Disadvantages of Legislation -
1) Certain legislation abridges the rights of individuals and are referred to Judicial Review.
2) It results in the amendment to the constitution and leads to conflict between legislature and judiciary.
3) No scope for judicial discretion -