Taxes
Taxation is the involuntary compulsory contribution made by individuals and organizations to the government in order to finance its activities (Bewley 2000). Taxation is also used to finance the functions of the government. Ideally, it is the major source of finance for the government. Some of the functions of the government include the provision of security, payment of debts owed by the state, expenditure on war and maintenance of law and order in the country. Studies have shown that a country’s economy will be balanced if the government expenditure is equal to the level of taxes in the country (Bewley 2000). In this case, if the taxes are more than the government expenditure, then there will be a surplus in the economy. However, if the government expenditure is more than the taxes, there will be a deficit in the economy.
The taxes of the Soviet bloc have been fluctuating from the year 1998. The personal income tax was introduced in the late 1997 and that is why the taxes are shown from the year 1998. During the first four months of 1998, the taxes of the Soviet bloc increased. This shows that the personal income had started gaining momentum from its initial incorporation. However, in the month of May in 1998, there was a reduction in the level of taxes. This indicates that there was a reduction in the taxable income. It could also mean that the level of employment had fallen to some extent. This is because a decrease in employment would reduce the total income that would be taxed. The taxes collected in the next two years increased from this period. However, the taxes collected in the next two years increased. From May, the taxes increased over the years, although there were declines in the months of August, October and November.
The results of 1999 show that the taxes collected in January were lower than the collection made in the month of December in 1998. In the year 1999, there was an increase in the taxes in the first four months. However, there was a decrease in the taxes collected in May in that year. From this month, there was an increase in the taxes collected in the next two months. The general trend in the year 1999 for the taxes collected was an increase in most of the months, although there were declines in the months of August and October. In that year, there were declines in the taxes collected only in three months as compared to the year 1998.
The taxes collected in January 2000 showed a decrease in relation to the value realized in December 1999. From 1998 to the year 2000, there has been a decrease in the taxes collected between the months of December and January. In the year 2000, the taxes collected in the first three years increased, after which they declined in the month of April. The taxes collected also declined in the month of May. From that month, the taxes collected increased over the next months, although there was a decline in the month of August. In the year 2000, there was a decrease in the taxes in only three months. In the year 2001, the level of taxes collected fell drastically from January to February. However, this level increased in the months of March and April.
The ministry of finance should prepare forecasts for future tax collection based on the policies imposed in the country (Dahan 1998). The expected tax collection also depends on tax administration of a country. The employment level is also important to forecast the expected tax collection. More so, the patterns of tax collection are also important in analyzing the future tax that is to be collected. These are the considerations that should have been taken by the ministry of finance before setting the expected tax to be collected.
It has been forecasted by the government that the tax collected in the year 2001 will be 7,789,000.00 thousand markka. Based on the pattern of tax collected in the previous years, this figure would seem to be beyond the expectations of most financial analysts. This means that the ministry should have estimated a lower value. The ministry of finance should forecast this level only if they are sure that the level of taxable income in the economy is going to increase. The taxable income is going to increase in the country only if there is an increase in the level of employment in the country. The tax collected will increase due to increase in the taxation of the income earned by the increased number of workers (Dahan 1998).
Based on information from articles, there is a new law that was passed in the year 2000 regarding the personal income tax. This law is expected to reduce the taxation of income received from salaries. This is meant to improve investments in the country (Jenkins 1999). The ministry should make these considerations to know that the level of tax collected will decline if this law is implemented. In the year 2001, the tax collected will decrease due to the reduction in the tax rate as specified in the law passed in the year 2000. Although the revenue from taxation is expected to be recovered due to the passing of this law, the recovery is less likely to be realized in the year 2001. Therefore, the ministry of finance needs to review the forecast of tax collection in the year 2001.
Based on the pattern of the tax collected in the years 1998 to 2000, one may be in a position to forecast the tax collected in May 2001. Based on that pattern, the tax collected in May 2001 is likely to be approximately 550,000 thousand markka. In the years 1998 to 2000, the tax collected has been decreasing from the month of April to the month of May. There is a high probability that the tax collected will decrease from the month of April to the month of May in the year 2001.
In conclusion, the analysis of the tax collected is important since it helps the financial department of a country to estimate the expected future tax collections. The forecast of the expected tax collection is relevant to the ministry of finance since the information is important in formulating the budget for the government. This budget will help the government to make proper planning and improve its decision making process. In order to increase the taxes collected, the government should increase the variety of taxes imposed on individuals and organizations. This will help in financing its projects and other public functions.
References
Jenkins, P, (1999). Tax Reform in Developing Countries. London. Duke University Press.
Dahan, M, (1998) Monetary Economics. London. Palgrave Macmillan.
Bewley, T, (2000) Advances in Econometrics. Cambridge. Cambridge University Press.
