Why taxation

For these reasons it is important for organisations working on debt to look at how tax can be used to reduce the dependence of southern country governments on unsustainable external financing. A further problem is that if aid is channelled towards projects that would otherwise have been paid for by tax revenues, those tax revenues may be diverted to corruption. In sum, increasing revenue from tax reduces dependency on foreign donors and helps governments and their citizens to escape the aid and debt trap.

Taxes can be used to ensure that all social costs and benefits of production or consumption of a particular good are reflected in the market price. The design of a tax system can contribute to the achievement of other social benefits by making it costly to engage in actions considered socially undesirable, or by incentivising behaviour that is considered beneficial to society.

On the consumption side, this may include taxing tobacco to limit damage to health, or petrol to limit environmental costs. It may also be used to discourage speculation on essential products and services, which prevents the poor from accessing them.

In the context of climate change, it is clear that market mechanisms do not price our consumption and production in a way that considers the impacts on future generations. However, advocacy on tax in this area also needs to consider any potential negative impacts on the poor. On the production side, inhibitive taxes can, for instance, be imposed on aspects of mining activities that potentially cause environmental strain on the immediate ecosystem and nearby communities.

Studies have pointed out that the social and environmental costs that occur as a result of the extraction of minerals are largely unaccounted for when making the decision about whether or not to embark on a mining project. Thus, taxes can go some way towards internalising these otherwise unaccounted for costs, for example through allocating a share of the mining royalty to local development funds earmarked for community needs.

Another approach could be to tax carbon emissions generated through maritime transport, or aviation in particular, and use the receipts for climate change adaptation and mitigation efforts. But it must be stressed that these taxes should go hand in hand with regulatory mechanisms such as anti-pollution laws and regulations to attain social objectives. It has highlighted that at least 90, people die every year from tobacco-related diseases, in a country with an adult smoking prevalence of Research from the World Health Organization and the Philippine Department of Health outlines the range of undesirable costs that tobacco use in the Philippines imposes on society and its citizens, including disease and death, increased healthcare costs and potentially increased hunger, malnutrition and poverty, if scarce resources are used for purchasing tobacco.

In order to demonstrate the benefits of taxing tobacco, they show the evidence of a strong correlation between the real price of tobacco and smoking levels in countries where this has been measured, including South Africa, Singapore,Thailand, Canada and the US. Thus, increasing the price of tobacco through taxation can have a real positive impact upon public health. Moreover, the taxes collected will generate additional revenue, which can be allocated for social development spending such as health and education.

The bills seek the setting of a single rate for all cigarettes, increasing the rate and indexing it to inflation, and earmarking some of the revenues for health promotion programmes and providing an alternative livelihood for tobacco farmers. They produced their own reports and fact sheets to make their case. Supported by a regional tax initiative of the Southeast AsiaTobacco Control Alliance SEATCA , they also provided evidence to their parliamentarians from elsewhere in the southeast Asian region, such as on the impact of the tobacco tax in Thailand currently at 85 per cent of the base price of cigarettes , which has contributed to gradually declining smoking prevalence, yet a tripling of government revenues from tobacco tax from to As a result of this advocacy, the Parliament has included a new tobacco tax in a local tax bill, the RegionalTax and Levy Bill, which proposes to increase tobacco excise tax to 10 per cent at the district level.

Tobacco companies have lobbied to delay the tax until However, Bolivia has struggled to benefit from its vast underground wealth since the sector was privatised in as part of its structural adjustment reforms. With privatisation, the royalties for the vast majority of companies were lowered from 50 per cent to only 18 per cent.

There was great national concern over the reform. Research showed that the government was capturing less and less revenue from the sector 37 per cent of the turnover in was reduced to 27 per cent in , in a context of huge increases in investment, production and exports with corresponding increasing prices.

Civil society organisations such as the Centre for Labour and Agricultural Development CEDLA took the lead in researching and educating the population about the impact of the reforms, which contributed to popular discontent and a series of mobilisations and protests led by indigenous groups.

As a result of the pressure, the Bolivian Congress finally passed a law in May which provided — among other things — for a new royalties and tax structure on oil and gas extraction. All reserves became subject to the 18 per cent royalty rate, as well as to a new direct tax of 32 per cent on the value of all oil and gas production.

As a result, the Morales government has increased spending on social programmes. Three major cash transfer programmes have been developed: an expansion of public pensions to relieve extreme poverty among the elderly; a grant for poor families to increase primary school enrolment; and, most recently, a grant for uninsured new mothers as an incentive for them to seek medical care during and after their pregnancies, in order to reduce maternal and infant mortality.

School breakfasts are also provided for primary school children to guarantee all school children at least one meal a day. None of these programmes would have been possible without the reforms to oil and gas taxation. However, research by both government and civil society shows that the poor pay substantially more of their income in taxes than the rich.

It is estimated that very poor families — those earning only up to two minimum salaries a month — spend around Richer families — those earning more than 30 minimum salaries — are estimated to spend only Tax concessions are common and the income tax burden on the richest has actually been reduced in the last decade.

Various reforms have also brought in new tax breaks for companies. In the government passed a law reducing the rate of corporate tax from 25 per cent to 15 per cent as well as bringing in a number of exemptions from corporate income taxes.

Progressive tax reform in Brazil is long overdue. It engaged in research, training and advocacy focused on the gender impact of government budgets. In its first year, the WBI examined four areas — housing, education, welfare and work — as well as the broader issues of public sector employment and taxation.

The regressive nature of the indirect tax bears disproportionately on women, precisely because the majority of the poor are women. The analysis also examined the impacts on women of a range of other types of tax and recommended that government tax data include gender breakdowns to facilitate more sophisticated analyses of the gender impact of taxation. In the late s, the government followed some of the WBI recommendations and published the number of male and female taxpayers who submit returns.

The WBI expanded its work over the years to encompass all sectors of the budget. For instance, pressure from the WBI and other groups led the government to remove the VAT on paraffin, which is consumed heavily by the poor — this had a positive impact on women in particular, given that there are more women than men among those living in poverty and paraffin is largely bought by women.

However, despite a strong campaign against the tax, the VAT law was passed in Congress. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Taxation is a term for when a taxing authority, usually a government, levies or imposes a financial obligation on its citizens or residents. Paying taxes to governments or officials has been a mainstay of civilization since ancient times.

The term "taxation" applies to all types of involuntary levies, from income to capital gains to estate taxes. Though taxation can be a noun or verb, it is usually referred to as an act; the resulting revenue is usually called "taxes.

Taxation is differentiated from other forms of payment, such as market exchanges, in that taxation does not require consent and is not directly tied to any services rendered.

The government compels taxation through an implicit or explicit threat of force. Taxation is legally different than extortion or a protection racket because the imposing institution is a government, not private actors. Tax systems have varied considerably across jurisdictions and time. In most modern systems, taxation occurs on both physical assets , such as property and specific events, such as a sales transaction.

The formulation of tax policies is one of the most critical and contentious issues in modern politics. The U. Instead, federal agencies assessed user fees for ports and other government property.

In times of need, the government would decide to sell government assets and bonds or issue an assessment to the states for services rendered. Headlines are lurid. Faced with such strength of public feeling, Osborne is forced to backtrack. His incendiary proposal? But we should pay more attention. Because how we tax, who we tax and why we tax determines what kind of society we become, giving financial expression to our cultural values and priorities. Far from being dry and dusty, taxation is a topic that could not be more political.

Indeed, for Martin Daunton, Emeritus Professor of Economic History, taxation goes to the heart of fundamental questions. The definition of equality. Daunton points out that these issues are now also international: national revenues are threatened by tax havens and the ability of large companies to book profits in low-tax regimes. It causes fewer economic distortions and raises more money with less damage to the economy.

But because the pasty tax was frameable as an attack on the working class, it was easy to bring down. If anything, it is primarily politics. Depending on the nature of tax burdens in a given country, the World Bank Group can help governments improve competitiveness :. The World Bank Group works with governments to create fair and equitable tax systems by reducing the adverse impact of the tax system on the poor, which may include helping to:.

Innovations in Tax Compliance is a World Bank Group program that aims to advance tax reform and compliance in developing countries. The Global Tax Program supports the strengthening of tax systems in developing countries. The Prosperity Collaborative is a multi-stakeholder initiative dedicated to helping countries create better tax systems through innovative technology.

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To learn more about cookies, click here. Understanding Poverty Topics. Equip revenue administrations with knowledge and tools to raise revenues in hard-to-tax sectors and reduce the size of the shadow economy.

Institute transfer pricing arrangements and mechanisms for resolving disputes between taxpayers and revenue administrations that secure a fair share of taxes on profits for developing countries, Vietnam being a recent example. Expand the tax net to include the digital economy , informal sector and environmental damages.

Build trust in the tax system by fighting tax evasion through early detection, smarter auditing, and effective investigation and prosecution that hold evaders accountable.