Question

In order to promote economic growth, the government can provide tax incentives. This may encourage the creation of job opportunities. For instance, it is possible giving tax related incentives to new entrants (beginners of new business). On the other hand, unless taxes are collected adequately, it is not possible to run government offices or fund social amenities, or any government operation. How would you reconcile the two seemingly opposing instances. What do you think?

Answer 1

The Motive of government to provide tax incentive to the new entrants to assist business or to drive specific industries or firm. Taxeson income reduce returns to capital and labour. Taxes on consumption reduce spending to help correct market failure and to encourage investment that generate positive market externalities. There are many other taxes which are levied by the government on the firms by increasing their tax government can fullfill its expenditure.