Taxation: Tax and Government Essay

Taxation * Defined as the power of the sovereign to impose burden or charges upon persons, property or property rights for the use and support of government In order to enable it to discharge its function. Nature of Taxation Power * The power of taxation is both inherent and legislative in character because it has been reserved by the State for it to exercise * It is inherent because the sustenance of government requires contribution from them. * The power of taxation is legislative in character because only the legislature can make tax laws.

Purpose of Taxation * The primary purpose of taxation is to raise revenues for public needs so that people may be enabled to live in a civilized society. * It also serves a variety of purpose; * It may be increased in order to stabilize prices and stimulate greater production. * Taxes on imports may be increased to favor domestic production * Or decreased to encourage foreign trade * It can also mobilize capital to be poured into capital deficient fields of business. Thus, Taxation is an instrument of fiscal policy, and fiscal policy Influences the direction and structure of money supply, prices and of the national economy. Basis of Taxation * The power of taxation originated from the theory that the existence of a government is a necessity. * No government, whether democratic or despotic, can exist without resources to finance its operation. * A true tax is an exaction for revenue that is for the support of the government.

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Inherent Limitation of the Power of Taxation 1. Limitation of public purpose – A tax is for the public purpose where it is for the support of government, or any of the recognized object of the government, or where it will directly promote the welfare of the community in equal measure. 2. 2. Limitation of territorial jurisdiction – it follows that its taxing power does not extend beyond its territorial limits, but within its limit, it may tax persons, property, income or business. 3.

Limitation of double taxation – understood as direct duplication taxation which means taxing twice by the same authority for the same purpose during taxing period. 4. 4. Limitation of non-delegation of taxing power – the constitution provides that sovereignty resides in the people and all government authority emanates from them. 5. 5. Limitation of exemption of government agency or instrumentality – the general rule is that agencies and instrumentalities of the government is exempted from taxation.