Tuesday, October 7, 2014

Taxation, Tax and Purposes of Taxation

Taxation is the act of levying a tax.  It’s the process or means by which the sovereign (independent State), through its law-making body (legislative branch), raises income to defray the necessary expenses of the government.

Tax are enforced proportional contributions from persons and property, levied by the State by virtue of its sovereignty for the support of the government and for all its public needs.  

Purposes of Taxation

1.     Primary Purpose – is to raise revenue for governmental needs; also called revenue purpose

2.     Secondary Purposes
a.     Compensatory purposes
1)    To reduce social inequality
2)    To encourage the growth of local industries
3)    To protect our local industries against unfair competition
b.     Regulatory purpose – to implement the police power of the State to promote the         general welfare 

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