What is tax? Why do governments collect taxes? If the governments decide to impose taxes, what should they tax? How should they tax those things - proportionately or regressively or progressively? What are the different forms of tax that the governments impose? On what principles, do the governments levy taxes? How taxes are distinguished from some of the alternative means available to a government to achieve similar objectives? Although a thorough understanding of possible answers to these and other questions is not mandatory to the determination of a particular tax liability, such an understanding constitutes an important part of the hallmark of any educated person.
The government of a country is responsible towards the nation and the people. For this, the government undertakes various activities for the betterment of its people. Keeping their interests at the focal point, the government performs various developmental works, generates employment opportunities, handles day-to-day administration, maintains peace and security and launches other public welfare activities. These activities cannot be executed without adequate resources. Therefore, the government is required to mobilize sufficient resources for the proper execution of nation’s economic development plans.
The government mobilizes the resources through different sources; mainly from debt and revenue. The debt may be internal and external. The revenue of the government comes from two sources: tax and non-tax. Income tax, property tax, values added tax, excise duties, customs duties etc. fall under the head of tax revenue. The revenue like gifts, grants, revenue from public enterprises, administrative revenues such as registration fees, fines and penalties fall under the head of non-tax revenue. Among the different sources of revenues in Nepal, taxation is the most important source, typically contributing for 80 percent or more.
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