Question Tag: Public Policy

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c) Discuss the social significance of the imposition of taxes by the government. (4 marks)

Social Significance of Taxation:

  1. Redistribution of Wealth:
    • Taxation plays a crucial role in redistributing wealth within a society. By imposing progressive taxes, where higher-income individuals or entities are taxed at higher rates, the government can reduce economic inequality. The revenue generated from these taxes can be used to fund social programs that benefit lower-income individuals, such as healthcare, education, and social security.
  2. Provision of Public Goods and Services:
    • Taxes are essential for funding the provision of public goods and services, such as infrastructure (roads, bridges, public transportation), law enforcement, and national defense. These services are vital for the functioning of society and are often not provided efficiently by the private sector due to the free-rider problem.
  3. Encouragement of Positive Social Behavior:
    • Through tax incentives and penalties, the government can encourage or discourage certain behaviors. For example, tax deductions for charitable donations encourage philanthropy, while excise taxes on tobacco and alcohol aim to reduce consumption of these harmful substances.
  4. Stabilization of the Economy:
    • Taxes are also used as a tool for economic stabilization. During periods of economic downturn, the government may reduce taxes to stimulate consumption and investment, thereby boosting economic activity. Conversely, during periods of economic boom, the government might increase taxes to cool down an overheating economy.
  5. Protection of Domestic Industries:
    • By imposing tariffs and taxes on imported goods, the government can protect domestic industries from foreign competition. This can be crucial for the development of nascent industries that need time to become competitive on a global scale.
  6. Environmental Protection:
    • Environmental taxes, such as carbon taxes, are imposed to reduce pollution and encourage the adoption of greener technologies. These taxes create financial incentives for businesses and individuals to reduce their carbon footprint, thereby contributing to environmental conservation.

Frank James is a foreign national and businessman. He approached Rampa, an accountant and civil servant at the Registrar General Department for assistance to establish a factory. Rampa was ready to help if Frank James offered him 20% of the yearly profit from the business. Subsequently, Frank James and Rampa signed a written agreement for Rampa to have 20% of yearly profit from the business. Frank James paid the 20% for the first two years. In the third and fourth years, Frank James failed to pay the agreed 20% on profit. Rampa insists on enforcing the agreement.

Required: Advise Rampa on the chances of success of his claim. (5 marks)

 

The case falls in the area of contract to use official position or public office to secure private reward. In the present scenario, the conduct of Rampa was injurious to the public interest as his expectation of private financial gains was bound to conflict with his official duties. The contract was illegal and unenforceable on the grounds of public policy. (5 marks)