Taxation is the sovereign's inbuilt power, exercised through the legislature, to impose a burden on subjects and objects within its jurisdiction with the purpose of raising revenues for the performance of legitimate government objects. In other words, it is the collection, by the government under the authority of law, of the share of the income of a person, whether natural or legal. Nevertheless, it is important to note that "taxation" is not just a term, but a system that the government of different nations controls and exercises throughout the world. There are different principles on which taxation is based.
These principles were laid down as follows:
The principle of Cost of Service holds that the cost incurred by the government in dispensing public goods to quench social wants should be seen as the basis of taxation. If the state charges the real cost of the service delivered from the people, the notion of equity or justice in taxation will be fulfilled. Thus, according to this theory, tax is payable according to the cost of public goods enjoyed by the people. Yet there are certain shortcomings to this theory as well. First, the cost of government services such as the Police Armed Forces and so on is not so easy to estimate. Secondly, this theory is against welfare standards because if the cost is the tax base, the poorer section can not be provided with welfare schemes by the government.
Another paradigm of equity or fairness in taxation is the capacity to pay. The most popular and often accepted principle of equity or justice in taxation is that, in accordance with their ability to pay, citizens of a country must pay taxes to the government. It seems quite appropriate and fair that taxes should be levied on the basis of an individual's taxable ability. For example, if an'S 'person's taxable competence is greater than the' T 'person, then the former should be asked to pay more taxes than the latter. Essentially, the ability to pay tax approach requires that the tax burden on individuals belonging to the same group should be the same. It appears that if according to this principle, taxes are levied, then justice can be achieved. But the main criticism lies in putting this theory into practice, as the definition of "Ability to pay" is difficult to determine. There is no homogeneous and peculiar way of accurately measuring the capacity or competence of a person to pay.
The principle of benefit denotes that individuals must be taxed in proportion to the benefit they receive from the state. Among taxpayers, the burden of taxes should be prorated in relation to the benefits they receive from the government, which means that those who receive more benefits from public goods must pay more taxes. The benefit theory subsumes the principle of the value of services, which implies that all citizens should pay tax in proportion to the benefit they derive from public goods and services. Nonetheless, this theory has also been subject to some criticism. Firstly, the benefits enjoyed by an individual from public services are very difficult to measure. Secondly, if the State maintains a certain link between the benefits it receives and the benefits it receives, it will be contrary to the basic principle of taxation, since the tax is levied for the benefit of the people. Third, as the government tries to give more benefits to the poor compared to other sections of society, the application of this principle will cause bias.
In order to achieve equality of sacrifice, this principle suggests that income and wealth should be taxed at a fixed percentage. The principle provides that people with a higher level of income should be taxed at a higher rate and thus have to pay more taxes, whereas those with a lower level of income have to pay lower rates. Thus, depending on an individual's level of income and wealth, the tax will be charged at a fixed percentage. This favors a progressive taxation system, which is followed in today's era by most nations.
Conclusion
In modern times, the different theories stated above are important touchstones and form the basis of the taxation system. If looked closely, then it can apparently be seen that one of these theories, either in original or modified, has been applied by nations around the globe in their tax system to achieve equity and fairness in their respective taxation system.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.
