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Taxation refers to the practice of a government collecting money from its citizens
to pay for public services. Without taxation, there would be no public libraries or parks.
The money raised from taxation supports the government and allows it to fund police and
courts, have a military, build and maintain roads, along with many other services. Taxation
is the price of being a citizen, though politicians and citizens often argue about how much
taxation is too little or too much.
Source: https://www.vocabulary.com/dictionary/taxation
2. What are the kinds of taxes?
There are many different kinds of taxes in the Philippines. But we can group them
into two basic types, namely, national taxes and local taxes. National taxes are those
that we pay to the government through the Bureau of Internal Revenue. Our national
taxation is based on the National Internal Revenue Code of 1997 or the Republic Act No.
8424 otherwise known as the Tax Reform Act of 1997, as amended. The import and export
tariffs levied by the Bureau of Customs under Republic Act No. 1937 otherwise known as
the Tariff and Customs Code of the Philippines (as amended) can also be considered as
national government taxes or duties.
On the other hand, the local government taxation in the Philippines are based on
Republic Act 7160 or otherwise known as the Local Government Code of 1991, as
amended. These taxes, fees or charges are imposed by the local government units, such
as provinces, cities, municipalities, and barangays, who have been given the power to levy
such taxes by the code.
Business owners, professionals, employees, consumers, and every taxpayer should
be aware of the different kinds of taxes in the Philippines. The following are some of the
common national and local taxes in the Philippines:
National Taxes in the Philippines
Capital Gains Tax is a tax imposed on the gains presumed to have been
realized by the seller from the sale, exchange, or other disposition of capital
assets located in the Philippines, including pacto de retro sales and other
forms of conditional sale.
Estate Tax is a tax on the right of the deceased person to transmit his/her
estate to his/her lawful heirs and beneficiaries at the time of death and on
certain transfers which are made by law as equivalent to testamentary
disposition. Estate tax is also based on a graduated schedule of tax rate.
Income Tax is a tax on all yearly profits arising from property, profession,
trades or offices or as a tax on a persons income, emoluments, profits and
the like. Self-employed individuals and corporate taxpayers pay quarterly
income taxes from 1st quarter to 3rd quarter. And instead of filing quarterly
income tax on the fourth quarter, they file and pay their annual income tax
return for the taxable year. Individual income tax is based on graduated
schedule of tax rate, while corporate income tax in based on a fixed rate
prescribed by the tax law or special law.
Value Added Tax is a business tax imposed and collected from the seller in
the course of trade or business on every sale of properties (real or personal)
lease of goods or properties (real or personal) or vendors of services. It is an
indirect tax, thus, it can be passed on to the buyer, causing this to increase
the prices of most goods and services bought and paid by consumers. VAT
returns are usually filed and paid monthly and quarterly.
example of final withholding tax is the tax withheld by banks on the interest
income earned on bank deposits.
Fees for Sealing and Licensing of Weights and Measures fees for the
sealing and licensing of weights and measures at such reasonable rates as
shall be prescribed by the sangguniang bayan of the municipality or city.
Source: http://businesstips.ph/different-kinds-of-taxes-in-the-philippines/
3. What is the importance of taxes in relation to economic development?
For economic development of a country, tax can be used as an important tool in the
following manner:
1. Optimum allocation of available resources
Tax is the most important source of public revenue. The imposition of tax
leads to diversion of resources from the taxed to the non-taxed sector. The revenue
is allocated on various productive sectors in the country with a view to increasing
the overall growth of the country. Tax revenues may be used to encourage
development activities in the less developments areas of the country where normal
investors are not willing to invest.
2. Raising government revenue
In modern times, the aim of public finance is not merely to raise sufficient
financial resources for meeting administrative expense, for maintenance of low and
order and to protect the country from foreign aggression. Now the main object is to
ensure the social welfare. The increase in the collection of tax increases the
government revenue. It is safer for the government to avoid borrowings by
increasing tax revenue.
3. Encouraging savings and investment
Since developing countries has mixed economy, care has also to be taken to
promote capital formation and investment both in the private and public sectors.
Taxation policy is to be directed to raising the ratio of savings to national income.
4. Reduction of inequalities in income and wealth
Through reducing inequalities in income and wealth by using an efficient tax
system, government can encourage people to save and invest in productive sectors.
5. Acceleration of Economic Growth
Tax policy may be used to handle critical economic situation like depression
and inflation. In depression, tax is set to increase the consumption and reduce the
savings to increase the aggregate demand and vice versa. Thus the tax policy may
be used to strengthen incentives to savings and investment.
6. Price Stability
In underdeveloped countries, there is another role to maintain price stability
to ensure growth with stability.
7. Control Mechanism
Tax policy is also used as a control mechanism to check inflation,
consumption of liquor and luxury goods and to protect the local poor industries from
the uneven competition. Taxation is the only effective weapon by which private
consumption can be curbed and thus resources transferred to the state. Thus the
economy can ensure sustainable development.
Thus it can be said that the economic development of a country depends
various reasons one of them are on the presence of an effective and efficient
taxation policy.
Source:
Country
http://hubpages.com/education/Role-of-Tax-in-the-Economic-Development-of-a-