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Discuss the assertion that the sole purpose of the tax system is to promote economic growth
Finance & Accounting
Pages 9 (2259 words)
Tax system contribution to economic growth Name Course Instructor Institution Date The idea that tax system affect economic growth has not been an issue of economists to divulge in but also policy makers. Policy makers currently consider taxation a major debatable issue as they try to outsmart one another in how to spur economic growth through tax reforms especially tax cuts (Irons, 2009).
Most, though not all of these studies did establish an undesirable effect of taxes on different measures of a country’s economic performance. A number of taxes especially income, property, capital gain and consumption based taxes have always attracted a lot of attention with respect to their impact on economic growth. Most of countries across the globe operate almost similar taxation policies and systems but they differ in how they apply them on key economic performance measures (Cordes, 2005). For instance, most countries in the world charge corporate income tax but certain countries operate it on progressive model while others charge corporate tax at a flat rate principle. Governments globally levy taxes for a number of reasons key among them raising revenue to fund investment, promote equity, discourage production of other products and encourage growth sensitive industries. Most people do not understand how various governments meet these objectives. The secret lies with tax systems operated by the government (Mankiw, 2009; p52). For instance, a government can decide to charge progressive tax rates as a means of promoting equity by taking money from high income earners an investing it in low income areas. ...
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