To foster economic process and development governments need sustainable sources of funding for social programs and public investments. Programs providing health, education, infrastructure, and other services are important to realize the common goal of a prosperous, functional, and orderly society. and that they require that governments raise revenues. Taxation not only pays for public goods and services; it’s also a key ingredient within the accord between citizens and therefore the economy.
All governments need revenue, but the challenge is to carefully choose not only the number of tax rates but also the assets. Governments also have to design a tax compliance system that may not discourage taxpayers from participating. Collecting taxes and charges could be a fundamental way for countries to come up with public revenues that make it possible to finance investments in human capital, infrastructure, and also the provision of services for citizens and businesses.
Much of this financing gap will have to be met by increased private-sector investment in sustainability, which needs appropriate tax policies to make the needed price incentives. Many countries are still struggling to gather sufficient revenues to finance their own development. Countries collecting but 15% of GDP in taxes must increase their revenue collection so as to fulfill the essential needs of citizens and businesses. This level of taxation is a very important tipping point to create a state viable and put it on a path to growth.
Making it easier to pay taxes improves competitiveness. Overly complicated tax systems are related to high levels of nonpayment, large informal sectors, more corruption, and few investments. Modern tax systems should seek to optimize tax collections while minimizing the burden on taxpayers to go with tax laws.
There is a requirement to confirm that the legal system is fair and equitable. Governments must balance goals like increased revenue mobilization, sustainable growth, and reduced compliance costs with ensuring that the legal system is fair and equitable. Fairness considerations include the relative taxation of the poor and therefore the rich; corporate and individual taxpayers; cities and rural areas; formal and informal sectors, labor and investment income; and also the older and also the younger generations.