Free Thesis Statements
Prospects and Challenges of Taxation in Africa
Tax is one of the factors that affect all of us and not only in business society of Africa. Taxes lessen our disposable income, thus, our spending and saving. In most of us, tax is considered as a burden but for the government, tax is a help to materialize its plans. Basically, the implementation of tax as a way of redistributing income hurt and benefited different group of people. Apparently, people benefiting from it find tax as a help and people who end up paying higher find it a burden. As the government imposes tax, it affects different classes of people and depending on the tax system that it chooses to adopt.
The most direct and visible method for governments of Africa to influence businesses is through taxation. It is the system used by national administrations to acquire money from both people and organizations. Collected taxes are then used in to support the government itself as well as to finance public services. Taxation is not only relatively permanent but compulsory as well. In addition, the amount contributed by an individual is not directly related to the extent of government services he or she receives.
Tax evaluation is necessary since lacking of it can give a big headache for business organizations in Africa. In essence, debt financing in consideration to tax and capital structure is inexpensive than equity financing since it is a tax acceptable expense. But, it is also more dedicated (hence, risky) due to repaying that includes the interest and principal and it is compulsory even if the business organization ends to a loss. Moreover, excessively debt can dampen shareholder and their funds from inflowing the organisation’s capital for the reason that ordinary shareholder is just honored with the profit left over after the creditors are compensated.
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