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Explain the social and economic objectives of taxation and how they influence government fiscal policies.

Topic: Inclusive growth and issues arising from it.

3. Explain the social and economic objectives of taxation and how they influence government fiscal policies. (250 words)

Difficulty level: Easy

Reference: Insights on India

Why the question:

The question is part of the static syllabus of General studies paper – 3 and mentioned as part of Mission-2024 Secure timetable.

Key Demand of the question:

To write about social and economic objectives of taxation and how these objectives shape government fiscal policies.

Directive word: 

Explain – Clarify the topic by giving a detailed account as to how and why it occurred, or what is the context. You must be defining key terms wherever appropriate and substantiate with relevant associated facts.

Structure of the answer:

Introduction: 

Provide a brief introduction to the concept of taxation and its importance in government finance.

Body:

First, with examples, write about the Social Objectives of Taxes – Income Redistribution: Explain how taxes can be used to reduce income inequality by taxing the wealthy more than the poor, and how this contributes to social welfare.

Next, write about the Economic Objectives of Taxes – Economic Stability, Economic Growth and Resource Allocation.

Next, write about how the social and economic objectives of taxation guide government fiscal policies.

Conclusion:

Conclude by summarising.