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1. Running head: PURPOSES OF TAXATION Purposes of Taxation Taxation is a tool that has been used by governments across centuries to fund their operations.. Modern governments rely on corporate tax, income tax, value-added tax (VAT), import duty, property tax, capital gains tax, and sales tax to collect revenues (Brownlee, 2016). The purposes of tax can be broadly categorized into economic growth, economic stability, income redistribution, and resource allocation (Brownlee, 2016). Accounting Homework Help Affiliation: Tutlance Date Taxation is the most important source of revenue for most governments. The revenue raised through taxation is essential in large scale capital formation (She Xu, 2017). The government can use the collected tax to invest in areas that boost the health of the economy. The government uses the collected taxes to invest in essential industries in the economy that might not be profitable for private entities. For example, governments use tax to provide water, electricity, and other basic needs that can be expensive when provided by the private sector only. Governments have used taxation as a tool for improving international competitiveness. Taxation can be used to make a country appealing to investors, thus stimulating foreign direct investment (FDI) while reducing the temptation of companies to move to low-tax regions (Brownlee, 2016). The countries with low corporate and income tax rates use this policy as an incentive for businesses that seek to maximize profits by reducing their tax burden. In theory, the attraction of these businesses is seen as important in increasing government revenue and creating employment. Wealthy individuals looking to avoid high taxation of incomes also move to these low tax regions. Governments can use tax

2. PURPOSES OF TAXATION 2 to realize social goals such as income inequalities by increasing the taxes imposed on the wealthier members of society while reducing the tax rate for the low income and poor (Brownlee, 2016). In conclusion, taxation can be used as an economic policy to achieve multiple objectives. Governments have heavily relied on taxation to achieve economic growth and stabilization goals, international competitiveness, and income redistribution. All taxation objectives are realized when taxation is used responsibly. Tax is also used with other fiscal and monetary tools to achieve economic goals on a large scale. References Brownlee, W. E. (2016). Federal Taxation in America. Cambridge University Press. She, C., & Xu, J. (2017, June). Study on the Correlation between Taxation and Economic Growth. In 2017 2nd International Conference on Education, Sports, Arts and Management Engineering (ICESAME 2017). Atlantis Press.