Role Of Tax Law In Economic Growth

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It establishes the nexus between the tax system and economy of a country hence I will aim at showing the role of the tax law in increasing a country’s economic growth. It defines the concepts of tax law (and related terms such as taxation) and economic growth, as well as explain how they manifest in the society. I will then establish the relation between the two concepts and conclude with the various ways in which tax law increases economic growth. Economic growth refers to the increase in a country’s productive capacity as measured by comparing the gross national product (GNP) in a year with the GNP in the previous year. Economic growth therefore means an increase in real GDP. The importance of GDP lies in the fact that it provides a basis…show more content…
It also means the increase in what an economy can produce while utilizing all its available resources. It should be noted that other factors such as increase in capital, technology advancement are fundamental factors in increasing economic growth besides taxation. On the other hand, the concept of tax law is not a common one, except deriving it from the common notion of taxation in society. Taxation refers to the act of a taxing authority levying tax. It is the imposition of duties for the purpose of raising revenue and it is a measure adapted by the government to extract money from the people or organizations by operation of law. For an efficient tax system therefore, it need to be governed by law and this is the branch of law known as Tax…show more content…
This is because the minority rich get richer at the expense of the majority poor who are often employed as laborers. They thus would be unable to contribute much to the economy through spending/consumption since the minority rich are in charge of the factors of production. This can be done through favorable income tax policies so as to improve economic growth. Lower income tax increases disposable income of consumers and increases consumer spending guaranteeing the population a way of contributing to the growth of the economy. The remedies available include progressive taxation where a person is taxed depending on the rate of one’s earning, meaning the high earning are taxed higher than the low-earning workers. This also needs the legal backing where such majority low-earners are satisfied with the taxing policy- a position that has been adopted in the Ugandan system of Pay As You Earn where the tax is levied off as a percentage by the employer hence no complaints by the employee. Such laws and policies help create more government revenue and lead to a boost in the

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