Non-revenue objectives of taxation

The primary purpose of taxation is, of course, to raise revenue for the support of the government. However, taxation is often employed as a device for regulation by means of which certain effects or conditions envisioned by governments may be achieved. Thus:

(1) Taxation can strengthen anemic enterprises or provide incentive to greater production through grant of tax exemptions or the creation of conditions conducive to their growth.

(2) Taxes on imports may be increased to protect local industries against foreign competition or decreased to encourage foreign trade.

(3) Taxes on imported goods may also be used as a bargaining tool by a country by setting tariff rates first at a relatively high level before trade negotiations are entered into with another country to enhance its bargaining power.

(4) Taxes may be increased in periods of prosperity to curb spending power and halt inflation or lowered in periods of slump to expand business and ward off depression.

(5) Taxes may be levied to reduce inequalities in wealth and incomes, as for instance, the state, donor’s and income taxes, their payers being the recipients of unearned wealth or mostly in the higher income brackets.

(6)  Taxes may be levied to promote science and invention or to finance educational activities or to improve the efficiency of local police forces in the maintenance of peace and order through grant of subsidy.

(7) Taxation may be made as an implement of the police power to promote the general welfare. By way of illustration, it has been held that the Sugar Adjustment Act is an act enacted primarily under the police power and designed to obtain of the readjustment of the benefits derived by people interested in the sugar industry which constitutes on e of the great sources of the country’s wealth and, therefore, affects a great portion of the population of the country.

As long as a tax is for a public purpose, its validity is not affected by collateral purposes or motives of the legislature in imposing the levy, or by the fact that it has a regulatory effect or it discourages or even definitely deters the activities taxed. The principle applies even though the revenue obtained from the tax appears very negligible or the revenue purpose is only secondary.

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