PUBLIC FINANCE AND TAXATION

The economy of a country has various players like individuals, households, consumers, producers, investors, borrowers, and the government at large. Nowadays, most countries are declaring the free market economic system whereby resource allocation decisions are determined by the interaction of demand and supply forces. In this type of economic system, the role of the government plays is very limited as one that of regulating the various market participants. The role of the government will be providing social, economic and political services to the public that can’t be provided by the private sector. The private sector is interested only about generating profit. The service which is required by the public which are not profitable for the private sector has to be financed and operated by the government. The government in this connection has to incur large expenditures on free education, health, road construction, military and defense, provisions of social amenities, justice, police protection etc. For all these huge expenditures the government will incur, it has to generate sufficient finance through various means’s like tax, grant, public borrowings provision of services.