Family Economics And Consumer Education 3 (2+1)

Lesson 13 : Taxation

Concept And Characteristics Of Tax

The modern state has to create conditions of social upliftment and betterment. It has to provide social and economic justice to the masses. It has to promote economic development of the country. In modern times the role of the state has become more intense and extensive. To perform all such tasks the state needs funds.
The study of monetary and credit resources of the state relates to the economics of public finance. Economics of public finance is concerned with the process of raising and disbursion of funds. Thus public revenue and public expenditure constitute the main aspects of public finance.
Finance: financial operations of the government or public authority like local state government and central government include:
Wings of public finance;

1. Public revenue
2. Public expenditure
3. Public debt –loans

1. Public revenue: Public revenue refers to the revenue or income of the public authorities. It includes all types of receipts including gifts and donations.

Sources of public revenue (PR) There are two main sources of public revenue

1. Tax revenue
2. Non tax revenue
1. Tax revenue: Tax revenue refers to the revenue received from various taxes. It is the main source of revenue to the government.
2. Non-tax revenue: The revenue is collected in other forms other than tax
Ex: Fines, penalties, donations, fees, chits, license fees, profit of government companies.
Tax: Tax may be defined as a compulsory contribution of wealth of a person or body of persons for the services of public authority. Tax payer cannot claim any benefits from government for the payment of tax.
Taxes are compulsory contributions imposed by the government on its citizen to meet its general expenses incurred for the common goods without any corresponding benefits to the tax payer. With the increasing public expenditure the volume and range of taxation has increased.
Taxation: Taxation is the source of public revenue. It constitutes the largest share in the total revenue of the government.
Taxation: “Imposing a Tax” and collecting revenue is the main objective of taxation.
Objectives:

1. Protecting the domestic industries
2. Achieving a quality and wealth.
Characteristics of Tax:
Following characteristics are associated with a tax
• A tax is a compulsory contribution to the state from the citizens.
• It is a contribution for the general or common use and not for any specific purpose or individual benefit.
• Tax is not the cost of the benefit received.
• A tax involves legal compulsion. The state uses its coercive power in imposing a tax.
• Nonpayment of a tax is a punishable offence.
Taxation is a product of growing solidarity and a sense of common social obligations