As the Financial year 2023-24 was coming to an end, I wanted to check how much collection the Indian Government has made by way of Direct Taxes in the current year so far. A basic Google search gave this result. The provisional figures of Direct Tax collections for the Financial Year 2023-24 (as on 17.03. 2024) show that Net collections are at Rs 18,90,259 crores, compared to Rs. 15,76,776 crores in the corresponding period of the preceding Financial Year (i.e. FY 2022-23), representing an increase of 19.88%. We all are aware that every year the government’s tax collection figure keeps increasing progressively. Naturally one would wonder how the government spends such huge sums.
The collection of taxes is an essential part of any government's responsibility, as it provides the necessary funds for public services and infrastructure that are crucial to the development and well-being of a society. Proper tax collection ensures that governments have sufficient resources to provide public services, invest in infrastructure, and promote economic growth. In this essay, I will discuss the importance of proper tax collection by governments.
Proper tax collection enables governments to provide essential public services, including healthcare, education, and social welfare programs. These services are necessary for ensuring the well-being and quality of life of citizens, and they cannot be provided without sufficient resources. Taxes are the primary source of revenue for governments, and proper tax collection is crucial to ensure that they have enough funds to finance these services.
Tax moneys are used to fund critical infrastructure projects such as roads, bridges, and airports, which are necessary for economic growth and development. These projects create jobs and stimulate economic activity, which in turn generates more tax revenue. Proper tax collection, therefore, is critical to ensuring that governments have sufficient resources to invest in infrastructure and promote economic growth.
Proper tax collection promotes fairness and equity in society. Taxes are a way of redistributing wealth from those who have more to those who have less, thereby reducing inequality. A progressive tax system, where those who earn more pay a higher percentage of their income in taxes, is a way of ensuring that those who have more contribute more to society. This system helps to reduce the gap between the rich and the poor, which is critical for social stability and cohesion.
Proper tax collection helps to discourage tax evasion and other illegal activities. When taxes are collected properly, there is less incentive for individuals and businesses to engage in illegal activities such as tax evasion, money laundering, and corruption. This is because the risk of getting caught and facing penalties is higher when there is a robust tax collection system in place. By discouraging illegal activities, proper tax collection promotes transparency and accountability in society, which is critical for the rule of law.
Regular tax collection can help to promote foreign investment and economic development. Investors are more likely to invest in countries with stable and predictable tax systems, as this reduces the risk of uncertainty and instability. When taxes are collected properly, it creates a favorable business environment that encourages foreign investment and economic growth. This, in turn, creates jobs and increases tax revenue, which can be used to further promote development.
Tax collection is critical for fiscal sustainability. When taxes are not collected properly, governments may resort to borrowing to finance their activities, which can lead to unsustainable levels of debt. This can result in high interest rates, inflation, and a reduction in the government's ability to provide essential public services. Proper tax collection, therefore, is essential for ensuring that governments can maintain fiscal sustainability and avoid financial crises.
To sum up, proper tax collection is crucial for the development and well-being of a society. It enables governments to provide essential public services, invest in infrastructure, promote fairness and equity, discourage illegal activities, promote foreign investment, and maintain fiscal sustainability. Therefore, governments must prioritize the collection of taxes and ensure that they have robust systems in place to collect taxes efficiently and effectively. This will ensure that societies can thrive and prosper, and that citizens can enjoy a high quality of life.
The content made available in this article is for general informational purposes only. While every effort has been made to ensure the accuracy and completeness of the content, it should not be considered as a substitute for professional consultation.
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