Tax policy plays two important roles in financing economic development. One is to maintain an economy at a higher employment level so that the saving capacity of the people is raised with an increase in income per head. The second is to raise the marginal propensity to save of the community as far above the average propensity to the maximum [...]
The following points highlight the four major economic effects of taxation. The effects are: 1. A redistribution of income 2. A raising of prices 3. A reduction of incentive 4. A reduction of enterprise. Effect # 1. A Redistribution of Income: This effect is felt most in developing countries. A proportional tax will not affect the distribution of income, but [...]
In this article we will discuss the merits and demerits of direct and indirect taxes on an economy. Taxes may be classified as direct and indirect. Direct taxes are levied on a person's or a firm's income or wealth and indirect taxes on spending on goods and services. Thus, direct taxes are paid directly by the person or firm on [...]