Why We Pay Taxes
Governments provide a variety of services to their citizens, including education, healthcare, water, security, roads, and , among others. In order to provide these public goods and services, governments collectively use taxes and other sources of revenue as stated earlier. As such, taxes are compulsory payments that do not necessarily bear any relationship to the benefits of government goods and services received (Hyman, 1990). It is important to note that , by paying taxes, we do not receive a direct and immediate service (instantaneously) in return; in other words, by paying tax amounting to, for example Sh,sh. 1,000,000 in January, does not mean that you will be able to enjoy health care, education, security services of an equivalent amount in the same month.
The reason why we pay taxes is because one person cannot afford to fully pay for a service they use and thus it is the responsibility of governments to collect taxes in order to fund public goods and services for the benefit of the citizens.
The question and debate that follow is on what constitutes a fair system of taxation and a fair allocation of the tax burden; i.e., taxes based on wealth, on income and ability to pay, on economic activity or on perceived benefits (Spitzer, 2003). The answer to this is usually based on legal and statutory framework that governs the design of any country’s tax system. Whatever the tax system design, the widely documented common objectives of tax systems include:
- to raise revenue to be used to fund government operations;
- to assist in the redistribution of wealth and income (fairness/equity) and
- For regulation purposes, with a view to encourage or discourage certain activities such as smoking and other similar items.