What Is Tax And Why Is It Important?

What is tax and its importance?

The importance of taxes for the government when it comes to indirect taxation is that they are an automatic function that accompany the buying and selling of goods and services across the country.

They are therefore easy to collect and convenient for both taxpayers and the tax collection authorities..

What is tax planning explain its characteristics and importance?

There are three key characteristics of tax planning—investing to reduce taxes; planning your finances in such a way that you attract the least amount of tax, and the process of tax filing. As a result, tax planning affects all aspects of your money matters.

What are the four principles of taxation?

In The Wealth of Nations (1776), Adam Smith argued that taxation should follow the four principles of fairness, certainty, convenience and efficiency. Fairness, in that taxation should be compatible with taxpayers’ conditions, including their ability to pay in line with personal and family needs.

What are the major areas of tax planning?

Areas of Tax PlanningReducing Taxable Income . – one can use government schemes and programs to reduce his taxable income, it will directly reduce his tax liability. … Deduction planning. – there are many deductions provided by a taxation law. … Investment in tax planning. … Year-end planning strategies.

What are the ways to avoid taxation?

That’s how you can ethically and legally reduce business tax in the Philippines….Track and Claim Allowable DeductionsAdvertising and Promotions.Amortizations.Bad Debts.Charitable Contributions.Commissions.Communication, Light, and Water.Depletion.Depreciation.More items…

What is the importance of taxation in the Philippines?

Taxes help the government fund their projects for economic development. It’s also the lifeblood of outstanding government employees, like teachers. Contributing your share of the pie greatly helps in the development of the Philippines as a whole.

What is the main purpose of tax?

The main purpose of taxation is to raise revenue for the services and income supports the community needs. Public revenues should be adequate for that purpose. 2. Tax should, as far as possible, be levied equitably, according to ability to pay.

What are 3 types of taxes?

Tax systems in the U.S. fall into three main categories: Regressive, proportional, and progressive. Two of these systems impact high- and low-income earners differently.

What is the need of tax?

Helps Build the Nation It is through the taxes we pay that the government can perform civil operations. In other words, without taxes, it would be impossible for the government to run the country. Income tax is one of the biggest sources of income for the Indian government.

What is tax planning and types?

Tax planning: Tax planning is a process of analyzing one’s financial situation logically with a view to reducing tax liability. … Tax planning involves applying various advantageous provisions which are legal and entitles the assesse to avail the benefit of deductions, credits, concessions, rebates and exemptions.

What are the two main principles of taxation?

These are: (1) the belief that taxes should be based on the individual’s ability to pay, known as the ability-to-pay principle, and (2) the benefit principle, the idea that there should be some equivalence between what the individual pays and the benefits he subsequently receives from governmental activities.

What are the advantages of tax?

Tax advantage refers to the economic bonus which applies to certain accounts or investments that are, by statute, tax-reduced, tax-deferred, or tax-free. Governments establish the tax advantages to encourage private individuals to contribute money when it is considered to be in the public interest.

What is the importance of tax planning?

Tax planning is important for both small and large businesses because it can help them to achieve their business goals. When you have a tax plan as the owner of a business, you can lower the amount of taxable income, gain more control of when taxes are paid and also reduce the rate of tax.

What are the uses of tax?

A portion of taxes may be used to service past debts. Governments also use taxes to fund welfare and public services. These services can include education systems, pensions for the elderly, unemployment benefits, and public transportation. Energy, water and waste management systems are also common public utilities.

What are the pros and cons of direct tax?

Merits and Demerits of Direct TaxesEquity: A direct tax is an equitable tax. … Certainty: ADVERTISEMENTS: … Elasticity: A direct tax has elasticity. … Productivity: Direct taxes constitute an important source of government revenue. … People’s Consciousness: A direct tax increases the civic sense of the people. … Lack of Popularity: … Evasion: … People’s Indifference:More items…