Name:Ojaomo Ademola olugbenga
Matric No:20/0531
Individual Taxation Assignment
Taxaion is a stabilization fiscal policy weapon
in every economy to control income
expenditure and debt in order to grow and
develop the economy for stability of balance
of payment and expansionay Taxation is defined as the
imposition of compulsory levies on individuals or entities by governments. This
definition is commonly accepted, but I could not find a specific author or year when
this precise wording was coined. Taxation as a concept has existed for centuries, with
various definitions proposed by economists, philosophers, and political thinkers
throughout history.
Some notable historical definitions of taxation include:
1. "Taxes are a portion of the property of the subject, taken by the sovereign, without
which the sovereignty could not be exercised nor maintained." - Charles de Secondat,
Baron de Montesquieu, in his work "The Spirit of Laws" (1748)
2. "Taxation is the price we pay for civilized society." - Oliver Wendell Holmes Jr.,
Associate Justice of the Supreme Court of the United States (1904)
3. "Taxation is the method by which the sovereign authority raises a revenue to
defray the expenses of government." - John Stuart Mill, in his work "Principles of
Political Economy" (1848)
While the phrasing may differ, these definitions generally capture the essence of
taxation as a means for governments to raise revenue from their citizens or residents
to fund public services, infrastructure, and other expenses associated with
governing.d expansionary fiscal policy
Taxation is a compulsoy amoy amount mposed y he oenmen on profitt of companies,
incoome of individuals,as well as oods and services.
Taxation is defined as the imposition of compulsory levies on individuals or entities
by governments. This definition is commonly accepted, but I could not find a specific
author or year when this precise wording was coined. Taxation as a concept has
existed for centuries, with various definitions proposed by economists, philosophers,
and political thinkers throughout history.
1. "Taxes are a portion of the property of the subject, taken by the sovereign, without
which the sovereignty could not be exercised nor maintained." - Charles de Secondat,
Baron de Montesquieu, in his work "The Spirit of Laws" (1748)
2. "Taxation is the price we pay for civilized society." - Oliver Wendell Holmes Jr.,
Associate Justice of the Supreme Court of the United States (1904)
3. "Taxation is the method by which the sovereign authority raises a revenue to
defray the expenses of government." - John Stuart Mill, in his work "Principles of
Political Economy" (1848)
Unfortunately, I could not find definitive authors or years for the specific definitions
of these different types of taxes in Nigeria. Tax laws and policies are usually drafted
by government committees or agencies, rather than being attributed to a single
author. However, I can provide the definitions as stated in relevant Nigerian tax laws
and regulations:
1. Company Income Tax:
Definition from the Company Income Tax Act (CITA) 2004:
"Tax payable for each year of assessment upon the profits of any company at the rate
prescribed in subsection (1) of section 40 of this Act."
2. Personal Income Tax:
Definition from the Personal Income Tax Act (PITA) 2011:
"Income tax payable for each year of assessment on the aggregate amounts specified
in section 3 of this Act."
3. Value Added Tax (VAT):
Definition from the Value Added Tax Act 1993:
"The tax which is payable on the goods and services consumed."
4. Petroleum Profits Tax:
Definition from the Petroleum Profits Tax Act 2004:
"There is hereby imposed a tax to be known as Petroleum Profits Tax which shall be
charged upon the profits of each accounting period of any company engaged in the
production of petroleum."
1. "Fiscal policy is the use of government spending and taxation to influence the
economy." - Paul A. Samuelson and William D. Nordhaus, in their book "Economics"
(19th edition, 2010).
2. "Fiscal policy is the means by which a government adjusts its spending levels and
tax rates to monitor and influence a nation's economy." - Definition from the
International Monetary Fund (IMF) glossary.
3. "Fiscal policy is the use of government spending and tax policies to influence
economic conditions, specifically by impacting budget deficits or surpluses." -
Definition from the Federal Reserve Bank of San Francisco.
4. "Fiscal policy is the government's program with respect to the purchase of goods
and services and the transfer of income to individuals, as embodied in the federal
budget." - Attributed to John F. Due and Ann F. Friedlaender in their book
"Government Finance: Economics of the Public Sector" (1977).
The balance of payments is a statistical record of a country's economic transactions
with the rest of the world over a specific period of time, typically one year. It
summarizes all international economic transactions and compares the demand for
and supply of a country's currency.
1. Definition from the International Monetary Fund (IMF) Balance of Payments
Manual, Sixth Edition (2009):
"The balance of payments is a statistical statement that systematically summarizes,
for a specific time period, the economic transactions of an economy with the rest of
the world."
2. Definition from John Daniels, Lee Radebaugh, and Daniel Sullivan's book
"International Business: Environments and Operations" (2015):
"The balance of payments is a systematic record of all economic transactions
between residents of a country and residents of foreign countries during a specific
period of time."
How does taxation serve as a weapon to
control income
Taxation is very cruttial in an economy as most of the income of Nigeria is generated
through tax revemue . Taxation helps as a weapon in controlling income in such a
way that an increase in taxes will leed to an increase in income generated by the
government since their revenue is gotten through taxes.Also an increase in increase
in tax also affects the private sector as tax incrases profit reduces.
HOW TAXATION AND FISCAL POLICY CAN SERVE AS WEAPON TO CONTROL
EXPENDITURE
In Nigeria, all expenditure are paid for with money generated from tax revenue ie
when the is an increase in taxes, the will be an increase in expendiure which means
the is more money for government to invest in capital projects.
HOW DOES TAXATION AFFECT DEBT
Taxation can affect national debt in several ways:
1. Government Revenue: Taxes are a major source of revenue for governments.
Higher tax revenues can help reduce budget deficits and the need for borrowing,
thereby lowering the national debt over time. Conversely, lower tax revenues can
increase deficits and the accumulation of debt.
2. Economic Growth: Taxes can influence economic growth, which in turn impacts
the government's ability to service and repay debt. Excessive taxation can discourage
investment, consumption, and economic activity, thereby slowing growth and
making debt repayment more difficult. Alternatively, appropriate taxation policies
that promote economic growth can increase government revenues and make debt
more manageable.
3. Debt Financing: Governments may use taxation policies to manage the financing of
national debt. For example, they may issue bonds or securities that are exempt from
certain taxes to make them more attractive to investors, thereby facilitating
borrowing and debt financing.
4. Confidence and Credibility: A government's ability to raise taxes effectively and
maintain a sustainable tax base can influence investor confidence and the credibility
of its debt. If investors perceive that a government cannot raise sufficient tax
revenue to service its debt, they may demand higher interest rates or be reluctant to
lend, increasing the cost of borrowing and debt servicing.
5. Income Redistribution: Taxation policies can redistribute income and wealth,
which can indirectly affect the demand for government services and the need for
borrowing. For example, progressive taxation that reduces income inequality may
reduce the demand for social welfare programs and associated government
spending.
HOW DOES TAXATION HELP IN THE STABILITY OF BALANCE OF PAYMENT AND
EXPANSIONARY FISCAL POLICY
Taxation can help in maintaining stability of the balance of payments and
supporting expansionary fiscal policy in the following ways:
1. Balance of Payments Stability:
a. Import Taxes: Imposing taxes on imported goods and services can help reduce
import demand, thereby improving the trade balance and the current account
balance in the balance of payments.
b. Export Incentives: Providing tax incentives or rebates for exported goods and
services can boost export competitiveness, leading to increased exports and an
improved trade balance.
c. Currency Stability: Effective taxation policies that promote economic growth
and stability can contribute to a stable currency, which is essential for a balanced
current account.
2. Expansionary Fiscal Policy:
a. Revenue Generation: Taxes are a major source of government revenue.
Sufficient tax revenue enables the government to finance expansionary fiscal
policies, such as increased government spending or tax cuts, without relying
heavily on borrowing.
b. Economic Stimulus: Certain tax policies, like temporary tax cuts or incentives,
can stimulate consumer spending and business investment, supporting economic
growth during periods of economic slowdown or recession.
c. Deficit Financing: While not ideal, taxation can help finance budget deficits that
arise from expansionary fiscal policies, reducing the need for excessive borrowing
or money creation that could lead to higher inflation or interest rates.
d. Automatic Stabilizers: Progressive income taxes act as automatic stabilizers, as
tax revenues decrease during economic downturns (due to lower incomes),
providing an automatic fiscal stimulus without the need for explicit policy changes.
CONCLUSION
