Effects Of Fairness In Taxation
Tax allowances as a subject still remains to a great extent relatively terra incognita. However, its effects can be inferred from its impact on the taxpayers and non-taxpayers. Tax allowance refers to the amount of income that a person can earn tax free. The limit placed on tax allowance ensures that people who earn low incomes are not taxed, and that people who earn high incomes are taxed. Tax allowance aims to guarantee a fair tax system. It creates non-taxpayers (who are usually members of the lower class who still require government amenities that are supported by taxes). Thus, the shortfall in the tax income is filled by increasing the taxes imposed on the wealthier component of the society. Hence, tax allowance has the effect of making certain that the wealthy members of the society bear a large proportion of the tax burden. The rich individuals are therefore made to pay an amount of tax that is relatively proportionate to their income levels, and this has prompted some of these individuals to search for tax havens. Tax allowance is relatively controversial, since some economists argue that it is a form of punishment imposed on people for being wealthy, and that this promotes market dormancy. However, this argument is countered by the fact that since tax allowance creates non-taxpayers, the tax revenue will therefore have to be raised from the individuals with taxable income.