Taxation Theories

Taxation theories explore how governments decide the best way to collect revenue. The **Incidence Theory** looks at who actually bears the tax burden—whether consumers, producers, or others. The **Benefit Theory** suggests taxes should be based on the benefit received from public services. The **Ability-to-Pay Theory** argues taxes should be fair and based on individuals' financial capacity, promoting equity. The **Efficiency Theory** emphasizes designing taxes that raise funds without discouraging work or economic activity. Together, these theories help shape fair, effective, and economically balanced taxation systems.