Question

What are the limitations of taxation as an instrument of resource mobilization for the government
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Answer 1

Answer:

$\huge{\mathbb{ANSWER : -}}$

Capital formation is an important determinant of economic growth. For accelerating the rate of capital formation, saving and investment rate in the economy has to be stepped up. For this purpose, savings have to be mobilised and channeled into productive investment. Due to the severe limitations of alternative ways of mobilising resources for economic growth such as government borrowing and money financing, the role of taxation in performing this task assumes greater importance.

Fiscal policy, if properly designed, is an efficient and equitable way of mobilising resources for augmenting public investment. Through it not only collective public savings can be raised for financing public investment but also at the same time private savings and investment can be encouraged. In fact, taxation may be the most effective means of increasing the total volume of saving and investment in developing countries where the propensity to consume is normally high. Further, the fiscal policy can be so devised that not only the objective of rapid capital accumulation or growth, but also other objectives of economic policy such as equitable distribution of income and wealth, price stability and promotion of employment opportunities can be achieved.

: -Aᶰ卂ήყⒶ❤

Answer 2

Explanation:

there are some limitations of raising resources through indirect taxes. First, they lead to cost-push inflation. The burden of indirect taxes is passed on to the consumers in the form of higher prices charged from them.

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