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Taxes Meaning
Taxes are a set of obligatory financial dues or several other charges that are levied on a legal entity by a government body. These tolls fund all the Government projects and initiatives that are directed towards public welfare. Public welfare initiatives take care of all the needs and wants of every citizen who’s a taxpayer. Government expenditures cover up many basic provisions like rental housing, primary education, healthcare in governmental hospitals, road-railway construction, pension plans with higher rates of interest, etc. Most countries around the globe impose taxes on their native people. The tax’s meaning applies to various levies like the service tax, income tax, VAT, company tax, customs, and others. Tax compliance assists the Government to figure out the percentage of people who are following the directives and laws by completing their tax payments within due time. It also calculates the amount paid against the standard dues which vary according to the income of an individual. Nowadays, the software is installed for this purpose. In the language of economics, taxes are solely designed to distribute wealth from individuals or businesses to the Government public sectors so that they can function efficiently by meeting the common public interests.
Sectors of Economy
The financial distribution of Government wealth is focused on four major sectors of the economy. In this article, we are going to take a brief look at each of the sectors.
Four principal sectors of the Economy:
- Primary sector
- Secondary sector or manufacturing sector
- The tertiary sector or service sector
- Quaternary Sector
Primary Sector
The primary sector gets the foremost priority among all the other sectors of the economy. Raw materials which are needed for sustenance are produced and extracted under this division. The farming, mining, forestry, fishing, and logging activities fall within this class of economic segment. Primary sectors contribute the most to the GDP of growing nations. In developed countries, a smaller number of workers are employed in this sector because of abundant access to advanced pieces of machinery.
Secondary Sector
Manufacturing plants and units constitute the second sector of the four sectors of economic theory. This division manifests all the construction sites and industries which supply marketable finished products. It acts as an intermediary between the primary and tertiary sectors. Raw goods are taken from the primary sector. Finished goods are either distributed in local markets or exported out of the country in association with the tertiary sector. Car manufacturing plants, building brands, textile producers, and other factories which produce market-ready consumables, fall within this category. Depending on the energy consumption, quantity of waste production, and scale of operation, these subdivisions are classified into heavy and light industries. Handicraft is a booming secondary sector in India. In developed nations, this sector ensures stable income through fixed salary jobs. This results from the positive influence of growth in the country’s GDP due to greater volumes of exports to other nations.
Tertiary Sector
This sector operates 24×7 to ensure standard goods and services are delivered on time to the consumers. However, the goods that they sell are not produced by them. Those commodities are manufactured by the secondary sector. The services which are sold to the consumers are sometimes limited to intangible experiences. Some common scenarios where service is given are restaurants, movie halls, air transportation, etc. Selling is done to other businesses as well in the form of wholesale markets. Modern economists have segregated the production and selling of information into a different branch which we will discuss later. Products that are finished with precision by the secondary manufacturing units are sold in tertiary establishments. Here, the main emphasis of the seller lies in the customer interaction and relationship building amidst which goods are transacted.
Quaternary Sector
This economic sector is also a form of the service sector. Here, the service providers meet the requirements of their clients through consultancy, research skills, media, technical knowledge, etc. The world of movies and dramas which entertain the mass community also fall under this category.
What is Impact Incidence?
Impact incidence is an alternative term to describe the taxpayers of a nation. They are legal entities who contribute towards social growth and well-being with their hard-earned money.
What do we mean by Shifting of Taxation?
Shifting of taxation simply refers to a switch between two individuals or legal entities which are solemnized to pay out the due tax levies. Shifting of taxation depicts two variations.
Single point shifting – In this situation, the manufacturer hikes the product price to force the consumer to expend more.
Multi-point shifting – In this second case taxation levies are switched from the manufacturer to the wholesalers. Retailers also need to pay more after wholesalers sell them the same product at a higher rate. Finally, the cost for the consumers also increases.
Conclusion
The sectors of the economy employ people and contribute to a country’s overall financial development. The Government funds all the public sectors from their revenue. This revenue is earned through the taxation of all the legal entities.
