There are many benefits of taxation that governments and citizens all over the world understand. These benefits include, redistribution of income, provision of public goods, discouraging the consumption of harmful commodities, and many others. However, many people don’t seem to understand that through government Brand Levitra taxation, both governments and citizens Cialis incur costs that can easily damage a nation’s economy.

One of the most common principles of taxation is the principle of economy. This principle states that governments should always seek to keep the cost of collecting taxes to a minimum for both governments and individuals.

But just what are these costs?

1. The Administration Costs

The first costs that are pretty obvious to many are the administration costs. Whether it is in Australia, the UK, the US or Canada, all the offices and institutions that deal with the collection of taxes incur some costs. These costs might be the costs of stationery, salaries, communication, telephone bills and so on.

2. Cost of Enforcement

There are many people who would rather not pay taxes if they could avoid doing so. What happens is that in reality, there are so many people who do try to avoid and evade paying their taxes. This means that taxation offices must devise ways and means to deal with tax evaders. They therefore hire investigators, lawyers, and auditors so that they can enforce the taxation laws. Unfortunately, this consumes a lot of resources which would have otherwise been used to finance development projects.

3. Cost of Reduced Production

Income tax in many places in the world is usually progressive. This means that the more you earn, the higher your taxation rate will be. Although the rate of progression differs from country to country, the effect is usually the same throughout. The more someone works, the more he will be taxed. This has the tendency to discourage hard work as one will easily say that even if he worked hard a good amount of the money will go to the government.

4. International Conflicts

Sometimes, governments can set out to protect their local industries by discouraging the consumption of goods from other countries. This may cause them to impose taxes on the imports from other countries. The effect of this is that the other countries can easily retaliate and impose taxes or sanctions on the goods of the country.

5. Misallocation Of Resources

Unless taxation has the main goal of discouraging consumption, taxation can easily create an unintended disequilibrium by artificially regulating the demand or supply of a particular commodity. The effect of this is that resources will not be allocated to areas where they are needed most. Instead, the focus will be in solving an artificial problem which really does not exists.

Regardless of the country that you are operating in, the economy as a whole will have to incur some costs because of the taxation. Despite all this, there is still a strong case for taxation; after all, nice things are never free.

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Category: Finance/Taxes
Keywords: tax exemptions