Economic and tax growth

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The Impact of Taxes on Goods and Services

The idea that taxes on goods and services have a direct impact on an economy's productivity is politically contentious. It has also been one of the most hotly discussed subjects in the media and among various social groups. Most analysts and economists agree that levying taxes on goods and services would have a major effect on the country's economic development (Adefeso and Tawose, 51). About every scientific study on the interaction between economic growth and taxes has found that taxes have a negative impact on economic growth. Any country's government must collect revenue to fund administration as well as offer basic services and social amenities to its residents. The government can also use the tax system to influence the supply and demand of a particular product and services by levying more taxes on that good, hence affecting the tax incidence. A country can establish a stable government by putting adequate measures of collecting income from tax system such as excise duties, stamp duties, as well as VAT (Value Added Taxes). Taxes raise approximately 30 percent of revenue in the UK and form part of the modern tax system used by the current government. Therefore, a stable tax structure can allow the government to collect revenues which in turn used to provide essential services to the public. Even though a larger percent of the revenues collected comes from other sources other than from taxes levied on goods and services, the government should impose taxes on property and services in the country. Imposing taxes on goods and services can affect price elasticity of a commodity in the market hence positively or negatively influencing the buying supply and demand of the goods and services.

The Role of Taxes in Economic Development

The economy of a country to a large extent depends on the revenues that the state can collect to build infrastructures such as roads, excellent housing facilities, railway services among others. Although the taxing of local goods will affect the prices of some commodities particularly when a state wants to limit the consumption of another good, the government can raise enough revenue for budgeting. One of the significant developments in the tax system is the institution of a system called the goods and services tax, GST introduced in India (Gaur, 66). The GST regime will help the Indian administration to collect more revenue on manufacturing, consumption as well as the sale of goods at the national level. The regime will strengthen the economic growth by levying more tax on some goods and services to influence the demand and supply hence higher revenues. With this kind of tax system put in place, the whole country will turn into a unified market whereby all the indirect taxes already in existence are expendable (Gaur, 66). Furthermore, GST will enhance the seamless movement of goods across all the states, therefore, reducing the cost associated with a transactional cost of business administration.

Benefits of Taxes on Goods and Services

Goods and services tax system will increase a country's GDP and the overall income; thus consumers can anticipate for more indirect benefits from the government (Shantakumar and Philippe, 04). Taxes levied on goods and services increase the aggregate GDP of a country besides, increasing the total revenue collected by the government. Levying of taxes has enhanced job creation in many countries where the government collect revenue and provide services which offers opportunity to the citizens who lack job (Clausing, 332). Imposing taxes on goods and services have serious harm on the economy of the country. However, the advantages of collecting taxes on commodities sold in a country outdo the benefits of not levying taxes on these goods.

The Importance of Tax Collection for Economic Growth

In conclusion, the government should collect revenue on property and services sold to raise enough revenue for the provision of services, infrastructure, social amenities and enhancing the economic growth. Imposing taxes on goods and services have serious harm on the economy of the country. However, the advantages of collecting taxes on commodities sold in a country outdo the benefits of not levying taxes on these goods.

Works Cited

Adefeso, H. A. and T. O. Tawose. "Tax Policy Reforms and Economic Growth in Nigeria." IUP Journal of Applied Finance, vol. 21, no. 2, Apr. 2015, pp. 49-63. EBSCOhost,

Clausing, Kimberly A. "Tax Holidays (And Other Escapes) in the American Jobs Creation Act." National Tax Journal, no. 3, 2005, p. 331. EBSCOhost,

Gale, William G., et al. "The Relationship between Taxes and Growth at the State Level: New Evidence." National Tax Journal, no. 4, 2015, p. 919. EBSCOhost.

Gaur, Archana. "Overview of Indirect Taxes and Goods and Services Tax in India." International Journal of Multidisciplinary Approach & Studies, vol. 2, no. 4, Jul-Aug2015, pp. 66-70.

Shantakumar, Arya and Philippe Stephanny. "Indirect Taxes in India: Time for Reform?" The Tax Adviser, no. 6, 2015, p. 407. EBSCOhost, 165.193.178.

November 09, 2022

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