What do you think is the pupose and importance of taxation?

Answer 1

The main reason any government has tax really is to manage and control the country. Think about it this way, the government through collective tax such as

- regressive tax (GST)

- progressive tax (marginal personal/income tax)

and

- Proportional tax (Company tax)

They are able to through collecting such funds, pay for their ventures, firstly the governments requires funds to run the country, so through the revenue the collect, the pay for transfer payments, social welfare, collective, public and merit goods, such as education and healthcare.

The government depending on the current state of the economy e.g. boom or trough will make decisions on whether to have a balanced, surplus or deficit budget, following the market equilibrium concept

where :

T + S + M = I + X + G

So depending on market trends and economical factors, the government will allocate the funds collected via tax, to redistribute it and fund the economy :)