Taxes are largely considered to be responsible for the following: a.. They distort business thinking; b.. Encourage the misallocation of economic resources; c.. Divert money to bizarre tax-motivated investments; d.. Absorb unacceptably large chunks of the GDP; e.. Deter foreign investment; f.. Morally corrupt the population, encouraging it to engage in massive illegal activities; g.. Adversely influence macroeconomic parameters such as unemployment, the money supply and interest rates; h.. Deprive the business sector of capital needed for its development by spending it on non productive political ends; i.. Cause the smuggling of capital outside the country (capital flight); j.. Foster the formation of strong parallel, black economies and the falsifying of economic records thus adversely affecting decision making processes; k.. Facilitate the establishment of big, inefficient bureaucracies for the collection of taxes and of data related to income and economic activity; l.. Force every member of society to – directly or indirectly – pay for professional services related to his or her tax obligations, or, at least to consume resources (time, money and energy) in communicating with authorities and navigating the bureaucracies that handle with tax collection on behalf of the state.
The Essay on Cutting Tax Government Money Taxes
... of wealth program. Cutting taxes across the board including income tax rates, capital gains and estate taxes among others should provide ... a truly balanced budget, lower interest rates and higher economic growth" (A Vote for a Sensible Center 194). To ... which requires management. This government management bureaucracy cost tax payers money and is unnecessary because free market demands and ...
Thousands of laws, tax loopholes, breaks and incentives and seemingly arbitrary decision making, not open to judicial scrutiny erode the trust that a member of the community should have in its institutions. This lack of transparency and even-handedness lead to the frequent eruption of scandals which unseat governments more often than not. All these malignant side-effects and by- products might have been acceptable if taxes were to achieve their primary stated goals. That they fail to do so is what sparked the latest rebellious thinking. At first, the governments of the world tried a few simple recipes: They tried to widen the tax base by instituting better collection, processing, amalgamation and crossing of information. This way, more tax payers were supposed to be caught in “the net”. This failed dismally. People found ways around this relatively unsophisticated approach and frequent and successive tax campaigns were to no avail. So, governments tried the next trick in their bag: they shifted from progressive taxes to regressive ones. This was really a shift from taxes on income to taxes on consumption. This proved to be a much more efficient measure albeit with grave social consequences.
The same pattern was repeated: the powerful few were provided with legal loopholes. VAT rules around the world allow businesses to offset VAT that they pay on consumables and services against VAT that they are supposed to pay to the authorities. Many enterprises end up receiving VAT funds paid by individuals who do not enjoy these tax breaks. Moreover, VAT and other direct taxes on consumption were almost immediately reflected in higher inflation figures. As economic theory goes, inflation is a tax. It indirectly affects the purchasing power of those not knowledgeable enough, devoid of political clout, or not rich enough to protect themselves. The salaries of the lower strata of society are eroded by inflation and this has the exact same effect as a tax would. This is why inflation is called “the poor man’s tax”. When the social consequences of levying regressive taxes became fully evident, governments went back to the drawing board. Regressive taxes were politically and socially costly. Progressive taxes resembled Swiss cheese: too many loopholes, not enough substance. The natural inclination was to try and plug the holes: disallow allowances, break tax breaks, abolish special preferences, and eliminate loopholes, write-offs, reliefs and a host of other, special deductions.
The Term Paper on Inflation in Bangladesh
1. Introduction Inflation is a general increase in prices and fall in the purchasing value of money. “Too much money in circulation causes the money to lose value”-this is the true meaning of inflation. What is Inflation. The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, ...
This entailed conflicts with special interest groups whose members benefited from the tax loopholes. Governments, being political creatures, did a half-hearted job. They abolished on the one hand – and gave with the other. They wriggled their way around controversial subjects and the result was that every loophole-cutting measure brought in its wake a growing host of others. The situation looked hopeless. Thus, governments were reduced to using the final weapon in their arsenal: the simplification of the tax system. The idea is aesthetically appealing: all tax concessions and loopholes are eliminated, on the one hand. On the other hand, the number of tax rates and the magnitude of each rate are pared down. Marginal tax rates go down considerably and so does the number of tax brackets. So, people feel less like cheating and they spend fewer resources on the preparation of their tax returns. The government, on its part, no longer uses the tax system to express its (political) preferences. It promulgates and enforces a simple, transparent, equitable, fair and non-arbitrary system which generates more income by virtue of these traits. Governments from Germany to the USA are working along the same lines. They are trying to stem what is in effect a tax rebellion, a major case of civil disobedience. If they fail, the very fabric of societies will be affected. If they succeed, we may all inherit a better world. Knowing the propensities of human beings, the safe bet is that people will still hate to see their money wasted in unaccounted for ways on bizarre, pork-barrel, projects. As long as this is the case, the eternal chase of the citizen by his government will continue.
