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Definition of tax and purposes or reasons for government to impose tax

Answer Text:
TAXATION
Tax: is a compulsory payment by either individuals or organizations to the government without any direct benefit to the payer.
Taxation-refers to the process through which the government raises revenue by collecting taxes.
Purposes/reasons for government to impose tax:
i. Raising revenue for government expenditure. This is the main reason for taxation.
ii. Discouraging /controlling consumption of certain commodities e.g. alcohol and cigarattes which are considered to be harmful.
iii. Discouraging importation of certain commodities in order to protect local industries. This is done by imposing heavy taxes on such commodities.
iv. Controlling inflation. Taxation reduces money supply by reducing peoples disposable income thereby controlling inflation.
v. Reducing inequality in income distribution; this is done by taxing the rich heavily and using the finances raised in provision of goods and services that benefit the poor.
vi. To protect the key sectors of the economy such as the agricultural sector, by stimulating their growth.