Taxation Essay

All the different kinds of taxes which are a result of a number of principles constitute the country's tax system. It is developed with regard to the taxation challenges. Depending on the country the tasks may be different, because it depends on a country's economic conditions, economic policy. However, the main task of charging taxes is the same everywhere – to get state revenue which is necessary to pay its costs (public administration, national security, education, health, transfer payments). Taxes may also be a measure of stabilization of state fiscal policies impact on the economy.

Taxation should in no way impede the economic development or have a negative effect on it. Too high taxes or wrong system of taxes may harm the economy. Taxation should help create new jobs, constantly strengthen and expand the country's economy, contributing to income and wealth redistribution. Therefore, when developing tax laws and economic policy it is very important to consider main points: what, how and from what sources those taxes will be paid, what is the taxpayers financial capacity, will taxes not be an unbearable burden that will slow the progress of the entire economic development. With regard to these aspects, it is necessary to respect the general principles of taxation. At this time in Lithuania economists distinguish the following basic principles of taxation:

1. Justice. Based on this principle, the tax should be determined by the overall objective of the rules which society recognizes as the most fair and reasonable. Everyone has to give the state the "right share." One of the taxation principles of justice requires that the taxes should be paid for those who use public services. According to another specter of justice taxation...

... middle of paper ...

... ex-ante and ex-post decisions made by entrepreneurs. The fact that the highest burden of tax comes from the profits affects market adversely as firms are likely to hide ‘’true’’ profits from the economic agents to avoid the bearing such a high burden of tax. The profit tax is the main source of tax income and it affects the expenditures and investments made by each firm. As the paper has shown, there are several reasons to change the taxation system in Lithuania. For example, the tax system should take into account financial incentives by each individual firm. However, there has not been created right strategy of taxation system in the country as it has its drawbacks. Therefore, a new taxation system should be established where imperfections are reduced as much as possible. However, it is not easy to create a taxation system where all tax principles are satisfied.