Theory question 110
Public FinanceSection B (answer four questions only from this section)
(a) Define the term taxation.
(b) In which four ways can the government of your country use taxation to improve the economy?
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(a) Taxation is the compulsory levy imposed by government on individuals, firms and goods and services to raise revenue, without a direct benefit to the taxpayer in return.
(b) Any four: raise revenue to provide social services and infrastructure; redistribute income through progressive taxes; discourage consumption of harmful goods; protect infant industries with import duties; control inflation by raising taxes; correct balance of payments deficits by taxing imports; encourage investment with tax holidays and reliefs; influence location of industries with tax incentives.
Explain how each use improves the economy.