Taxation is a process by which government through a taxing authority imposes a tax. Taxation applies to all types of involuntary levies ranging from income to capital gains.
“A tax is a mandatory financial charge imposed upon a taxpayer by a government organisation in order to fund various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law”
Many new business owners develop their businesses with an aim of being the best service providers in the free market. Initially, the government is restricted in terms of controlling how the business pricing will be for the goods and services provided. However, government taxation increases the expenses that businesses face, which make it more difficult for them to achieve profitability. This in turn will compile the business owner to set prices that are exaggerated, so as to realize the profit anticipated. The realization of a free market, which is a basic principle of liberty, is therefore limited.
The tax policy also leads to a situation where entrepreneurs are less likely to set up businesses because they think that their risky undertaking will have its profit reduced by high corporation tax.
Some indirect taxes lead to goods becoming very expensive and that would reduce the demand for the particular goods.
Individual liberty to do as one pleases without having restriction is also limited because high taxes lead to people abstaining from starting new businesses.
In conclusion, the introduction of high taxes in the business sector can be seen as a major government policy that limits the realization of liberty because it hinders the free market, and individual liberty which are the basic principles of liberty.
Masiye Nyirenda, Zambia
He is a participant in the February edition of the YAFO Ambassador Course. This is 3rd of the best three articles for week 3 assignment on identifying public policy that hinders economic freedom.