Discuss about Taxation and Government

The source of government revenue is mainly from taxation imposed on the people and businesses in a country. It is this revenue that the government uses to run its operations and provide public goods like roads, healthcare, education and national security.

However, there is ranging debate on how the taxation laws are formulated and implemented by the government. The laws seem to only meet government objectives with little regard to the subjects.

The foreign earnings by individuals are usually subjected to taxation in the source countries before being received by the beneficiaries. When they receive that income the individuals are supposed to declare that income so that it adds to other income earned locally for taxation by the federal government (Hodges, 75). Despite the individual getting a foreign tax credit, this still amounts to double taxation. Foreign incomes should not be taxed locally since they have already been taxed at source. Furthermore all income will be spent or invested locally and it will still be subjected to other indirect taxes like value added tax on consumption items purchased. Also what may qualify as a tax in a foreign country may not necessarily guarantee a tax credit under the US law.

The law also recognizes general businesses that are not registered as liability partnerships or corporations as liable individually for their debts and obligations incurred in the course of their businesses. This puts many micro enterprises in the same group as income earners engaged in formal employment. This is generally unfair as most of these businesses are not monitored and are not audited regularly to reveal their actual financial status. Despite these businesses paying taxes on income, they also pay for their business licenses which again amount to multiple taxation.

Corporations and also other publicly listed companies usually pay the federal government taxes based on the profits made in the year. They then pay benefits to their directors such as bonuses and also pay dividends to their shareholders. These beneficiaries are also required to declare these incomes to the authorities for taxation purposes (Clarence, 68). Therefore despite the corporation paying taxes on these earnings, the beneficiaries will also pay tax on the same but at another level. Investors who have invested in many companies end up paying more taxes and sometimes this may not be a real return on their investment.

The tax code also gives reprieve to property owners who hold income generating properties by allowing them to deduct the depreciation amounts from the income for taxation purposes. This gives them a credit equivalent to the depreciation amount multiplied by the tax rate. However this benefit is not enjoyed by those own non income generating properties. One cannot get this benefit if you own a residential house where you stay with your family. This is unfair since those who have these properties most likely invested the same amount of capital inform of loans and they are incurring the same interest rate payments to the banks. Financial institutions do not such considerations provided you repay their loans promptly.

There is therefore need for a review of the taxation law so that equity can be enforced in its application and implementation. The current law is not only unfair but unsuitable especially to individuals with multiple sources of revenue who receive little or no recognition for their efforts.

Works cited

Hodges, P  “Taxation Obligations” Web. 7^th May 2012.

Clarence, E “Taxation at corporate levels” Web. 7^th May 2012.

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