E. Taxation

 
Business contribute mainly to the development of a country by paying taxes,Tax is the legal and compulsory charge which must be given to the government from business in order to finance its activities.
Taxation is the process of accessing, collecting and administrating tax( process through which government obtain tax).
We have 2 types of tax which are:

1. Indirect tax, this is when the incident of paying tax can be shifted by the taxpayer to another person, 
      E.g: Value added tax( VAT) and customs duty charged on imports
 Characteristics of indirect taxes:
   • They are on commodities/materials
   • They are not compulsory i.e: one can leave paying the tax on commodity by not           buying it.
  • They tend to be regressive
  • They are not directly by the government but indirectly through intermediaries usually through business people.

2. Direct tax
• Direct taxes are those taxes where the incident can’t be changed by taxpayer to another person i.e: the burden is directly by a taxpayer.
• E.g : personal income tax like tax on salaries, property tax like tax imposed on personal wealth such as car, land ………..

3. Importance of taxes
• Raising the revenue for the state to finance public activities like hospital, school, infrastructure
• Reduce income inequalities i.e: rich are taxed while the poor are subsidized.
• It reduces the consumption of certain products such as cigarette, alcohol
• Helps in checking inflation by reducing purchasing power of the people
• It is like the imports to protect domestic infants, industries from competition of dumping cheap commodities from other country.