eco final

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FACTORS DETERMINANT TAX REVENUE IN INDIAGROUP 14:- VIJAY.A VIJAY.G VINUTH.M.N VIKAS NAG.VINTRODUCTION

Tax can be defined as the charge levied by the government of a country upon its habitants for its support or for the purpose of facilitating the public of that country. It is neither a voluntary payment by the tax payer nor like a donation. Rather it is an enforced payment to the government. On nonpayment of it, the tax payer will be punishable by law. The purpose of taxes is to create welfare for the society by providing public services, protection to properties, defense expenses, economic infrastructure etc. Findlay Shirras, the well-known authority on economics of public finance defines taxable revenue as the limit of squeezability, i.e., the extent to which the people of a country can be oppressed so as to make it to give money for the public revenue.

There are four main purposes of taxation which are revenue (collect a sum of money for government), redistribution (transfer from rich to poor), reprising (levied on harmful things e-g; tobacco, carbon), representation (accountability to general public by the government) HOW TAXES ARE LEVIED Taxes are levied at different percentage rates. These percentage rates are determined by comparing with income or consumption level. It has three basic types that are progressive, regressive and proportional rates. There are two major types of taxes which are direct and indirect taxes. There are different views about the definition of these two types. > In simple words it can be describes as direct taxes are those the burden of which is directly born by the tax payer > contrary to this if the burden of taxes is transferred to other or public, are called indirect taxes Tax Revenue:

Tax revenue is influenced by a variety of factors. In the short run, tax revenue may be less. In the long run, tax revenue of a country may increase on account of economic growth and rise in national and per capita income. Again, distribution of income and wealth also affects taxable revenue. Paradoxically, a high degree of inequality in the distribution of income and wealth implies a high index of relative taxable revenue. Tax revenue also depends on governments spending and functioning also.

If the government is efficient and undertakes successful welfare programmes, peoples patriotism and democratic attitude are encouraged so that the taxable revenue will be high, since people would be ready to sacrifice more and more. Similarly, sound monetary and fiscal policies of the government when they lead to economic stabilization and economic development, this helps to increase in tax revenue of the economy.Major Factors determining tax revenue:-The fact is that the taxable revenue is not rigidly fixed. It is a moving point. It is relative to so many factors that any change in any of them is bound to change our estimate about the taxable revenue of a nation. Findlay Shirras gives the following factors which determine the tax revenue of a nation.

1.Number of Inhabitants.It is pretty clear that the bigger the amount, the larger is the taxable revenue of the society to add towards the operating cost of the management. From this point of view India is well placed. Its taxable revenue will infinitely increase when the proper economic development of the country is brought about.2.Distribution of Wealth.If capital is more uniformly disseminated, the taxable revenue will be equally abridged. But if there are big accretions of capital in the minority hands, the management can collect additional money by levying taxes on the rich.3.Method of Taxation.A systematically created tax system with an intelligent collaboration of several typesoftaxes,direct as well as indirect, is certain to fetch in a better yield. Our tax system is not so much diversified, e.g., we have notaxeson large agricultural incomes. This certainly reduces the taxable revenue.

4.Purpose of Taxation.If the intention of taxation is to encourage interests of the public, they will be more eager to taxing themselves.5.Psychology of Tax-payers.Much relies on the people's approach towards an administration. A well-liked government can stimulate the will of the public and train them for larger sacrifice. A request to nationalism is over and over again the reason of the victory of a fiscal measure. This is what makes war loans successful. Psychology of the public is a vital feature, and unless they are appropriately advanced, they might be reluctant to taxing themselves.6.Stability of Income.If the revenue of the residents is unstable, there will be not much revenue for additional taxation. The vagaries of the monsoons in India account for a lower taxable revenue. It is only on stable incomes that long-term financial arrangements can be based.7.Inflation.It reduces the buying revenue of the nation and it cripples countless individuals; it has an unpleasant result on taxable revenue.The size of population:- Taxable revenue is very much affected by the increase in national income and by the rate of growth in population. If the increase in national income is greater than the growth in population, the per capita income goes up. The taxable revenue of the individual rises. If the rate of growth of population is higher than the national income, the taxable revenue decreases.The distribution of national income:- Taxable revenue is also influenced by the distribution of national income within a country. If there is unequal distribution of wealth in the country, the taxable revenue will be high, but if the income is equally distributed, then the taxable revenue will be low.Standard of living of people:- If standard of living of people is high, they work more efficiently so that they may enjoy a still better standard of living. When they work enthusiastically, they receive higher wages from their employers. Taxable revenue tends to increase then. Effect of inflation:- If country is in grip of inflation, purchasing power is reduced, taxable revenue of nation shrinks considerably. But if value of money is high and country is not faced with unemployment, then taxable revenue of people is quite high.Psychological factor:-Psychological factor, is a very important factor in determining taxable revenue of a nation. If people are satisfied that government is doing its utmost to raise standard of living of masses and in maintaining prestige of country, then they try to sacrifice their lives what to say of money for the government. A simple approach to patriotism brings forth tons of gold.THANK YOU