2.3. CONCEPTUAL FRAMEWORK
The diagram below represents the independent and dependent
variables. Since there are many variables, the researcher shall concentrate on
three most important variables such as Independent variable, Dependent
variable, and Intervening variables. This conceptual framework interlinks those
three types of variables following their interdependence. It is clear that
direct tax, Tax on goods and services and international trade and transaction
as independent variable impact on the economic growth as a dependent
variable.
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Independent variables
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Dependent variables
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-Direct tax ( DT)
-Tax on goods and services (TGS)
-Tax on international trade and transactions(TITT)
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Economic growth(GDP)
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Intervening variables
Fiscal Policy
Diagram1: Conceptual framework
Source: Researcher
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2.4. Theoretical framework
2.4.1Introduction on theoretical framework
This study review three theories of taxation: the cost of
service theory, the benefit theory and the socio - political theories of
taxation. According to the cost of service theory, the cost incurred by
government in providing certain services to the people must collectively be met
by the people who are the ultimate receivers of the service (Jhingan, 2009).
This theory believes that tax is similar to price. So if a person does not
utilize the service of a state, he should not be charged any tax. Some
criticisms have been leveled against this theory. According to Jhingan (2009),
the cost of service theory imposes some restrictions on government services.
The objective of government is to provide welfare to the poor. If the theory is
applied, the state will not undertake welfare activities like medical care,
education, social amenities, etc. furthermore, it will be very difficult to
compute the cost per head of the various services provided by the state, again,
the theory has violated the correct definition and tenets of tax, finally the
basis of taxation as propounded by the theory is misleading.
The limitations inherent in the cost of service theory led to
the modernization of the theory. This modification gave birth to the benefit
received theory of taxation. According to this theory, citizens should be asked
to pay taxes in proportion to the benefits they receive from the services
rendered by the government. The theory assumes that there is exchange
relationship or quid pro quo between tax payers and
government. The government confers some benefits on tax payers by providing
social goods which the tax payers pay a consideration in the form of taxes for
using such goods. The inability to measure the benefits received by an
individual from the services rendered by the government has rendered this
theory inapplicable (Ahuja, 2012).
The socio-political theory of taxation states that social and
political objectives should be the major factors in selecting taxes. The theory
advocated that a tax system should not be designed to serve individuals, but
should be used to cure the ills of society as a whole (Bhartia, 2009). This
study is therefore anchored on this theory.
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According to Bhartia (2009), a tax revenue theory may be
derived on the assumption that there need not be any relationship between tax
paid and benefits received from state activities. We shall accordingly
lookatsome of such theories as discussed below.
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