A Critical Analysis of Effectiveness of Tax Offences Control Mechanisms Under Rwandan Law

I.2. Justification of tax

The development of different sections of the economy is not possible without the state help. The government should develop irrigation, transport and communication, industrial and agricultural systems of the country for the rapid increase in the rate of economic growth^13(*). Therefore, Taxation is necessary because it is not possible or desirable to obtain all resources needed for the government programs from prices, licenses, and fees. Certain services, such as national defense and general public administration, can not easily be sold to individuals. This is because if these services are provided, the benefits are generally available to all individuals, irrespective of whether or not they pay, and one person's enjoyment of them does not diminish the benefits available to others. Similarly, it would not be socially acceptable to provide certain services, such as education and police protection only to those who are able to pay full costs because, then, only the `rich' would be able to enjoy these services.

The points stipulated in the following subsections give an outline to justify of taxation.

I.2.1 Economic Stability

Firstly taxes are imposed to maintain economic stability in the country. When it is a period of inflation, the state imposes more taxes so as to discourage the useless expenditures of the individuals and the same applies to deflation where taxes are reduced to enable the citizens spend more money. It is from here that indirect taxes may automatically stabilise the economy as much as goods having high income elasticity of demand are taxed more heavily.

I.2.2 Increase of government revenue

The main reason of imposing taxes is to raise revenue for financing public activities such as building schools, roads, and hospitals, maintain security of nationals, and safeguard territorial integrity thus playing a pivotal role in maintaining a political, social and economic environmental stability^14(*)

I.2.3 High employment level

When the revenue collected is used into developmental affairs, individuals get employed due to more employment opportunities created.

I.2.4 Fair distribution of income

There is also another reason which is fair distribution of income (Reduction of income inequality). Here the government imposes taxes to achieve equality in the distribution of national income where by the rich are taxed highly that will improve the welfare of the poor and taxing the poor less or giving subsides. This has already been done in the Rwanda context such as is PAYE system.

I.2.5 Protection policy

The policy of the government must be protected by enhancing local industries through imposing high taxes on imported commodities from other countries but of the same type (damping). The government can also subsidize home industries so that the cost of production is low. This will enable these industries to compete with other regional ones especially now that regional integration may not allow imposition of taxes on goods from neighbouring countries. Protecting home industries also solves a social problem of unemployment as local gain capacity they absorb unemployed skilled manpower.

* ¹³ Tayebwa. M Bernard, simplified economics 2nd edition (1991)

* ¹⁴ Living stone and Odd,(1980) health economics 1st edition