Public Finance Essay Example | Topics and Well Written Essays - 3250 words

Public Finance - Essay ExampleEffective tax system aims at complementing political sympathiess work out plans. Any shortfall in tax collection will lead to budget deficit that will lead to fiscal deficit. High government debt is detrimental for economic prospects of a country. It signifies swooning federal structure which will affect foreign placement. Foreign investors look out for stable economies to invest their money which will yield higher returns. Governments of different nations aim at promoting its export sector to foster its foreign exchange earnings. Thus, an effective tax system would look to compensate for the high subsidy plug-in that is given for promoting underdeveloped and export oriented sectors.Tax system across the world be categorize in three ways i.e. regressive, proportional and progressive. In general taxes argon levied on individuals and businesses. Government normally impose a certain percentage or slabs to determine the taxability of individuals and companies. There is another classification for taxes which is found on the impact and incident of taxation. It is direct and indirect. Direct taxes imply where the impact and incident is on the aforesaid(prenominal) individual and which cannot be shifted. Income tax, corporation tax are examples of direct taxes. Whereas consumption tax, excise duty, customs are indirect taxes. Such taxes have different points of impact and incident i.e. the burden of the tax can be shifted from the producers to consumers. In certain countries an amount is deducted from the income of individuals towards insurance contributions like NIC in UK (James, 2009).There are certain features that are attributed to the tax system to ensure equity at all levels. Governments across the world usually catch either of the three tax systems i.e. regressive, proportional and progressive. Fiscal authorities design the tax structure in a way that ensures a balance between savings and expenditure. It is a major trade reach for the