Article: Public Finance’s Use of Direct Taxes
Introduction
One essential element of public finance is direct taxes. These taxes are imposed directly on people and businesses, and they are paid to the government directly, bypassing any middlemen. They are essential to fiscal policy and government revenue.
Definition and Illustrations
A direct tax is one that the taxpayer pays to the government directly and is levied on their income, wealth, or property. Typical instances consist of:
Income tax is levied on either individual or business profits.
The value of owned property is subject to property tax.
Profits from the sale of assets are subject to capital gains tax.
Wealth tax is levied on a person’s net worth over a specific amount.
Features of Direct Taxation
Equity is determined by financial capacity; those with higher incomes pay more.
Certainty: The payment method and amount are well-defined.
Elasticity: Direct tax revenue increases in tandem with the state of the economy.
Administrative Efficiency: It is simpler to evaluate and collect from taxpayers who are already known.
function in the field of public finance
Government services like social security, infrastructure, healthcare, and education are all made possible in large part by direct taxes. They can also be used to reduce income inequality and redistribute wealth.
Advantages
encourages equity by levying taxes according to income levels.
use progressive rates to aid in economic stabilization.
promotes civic engagement.
Disadvantages
can deter productivity if charges are very high.
could result in decreased efficiency if avoided or dodged.
Complying with complicated tax regulations can be difficult.
Conclusion
For a nation’s economy to grow and remain stable, direct taxes are necessary. When created and properly executed, they provide a sustainable and equitable method of funding public services and advancing economic justice.
Summary
Income tax and property tax are examples of direct taxes that people or corporations pay to the government directly. They are essential for financing public services and are determined by the taxpayer’s financial capacity. Although they encourage equity and wealth transfer, direct taxes can be complicated and, in some cases, deter economic activity if they are badly crafted.
AUTHOR: MOHAMED YASIN
