Taxes and the Role of Government in Resource Management

By Param Vastani

To taxpayers of any nation, taxes being charged by the government in large proportions

often come to be an unpleasant obligation. It is indeed a fact that no taxpayer wants to

give a significant chunk of their hard-earned income to the government instead of

having it for themselves. Taxes create the capacity of a state to fulfill its goals and as

such, the government of a nation is responsible for using the collected taxes in an

efficient manner that is best for the population and satisfies their essential needs.

Through this article, I intend to emphasize that having resources is not enough and the

government has to utilize its resources effectively to have an effect.

Taxes are the foundation for a country’s infrastructure, public services, and social safety

nets. When they are utilized properly, taxes are a powerful tool for economic growth,

reduce inequality, and improve living standards. In a perfect world, a nation uses these

resources to build itself, improving its living standards, alongside its security and overall

global position.

 In reality, a democratic government has to make its way through satisfying various

groups of its population. Citizens want strong public services and resist tax hikes, while

businesses want lower taxes and less regulations. Investors seek favorable tax

conditions, and community organizations call for more social spending.

How effectively a government navigates this issue while using the resources for the best

interest of the people is the deciding factor. I now highlight a few examples in which

resources have been well managed by a government as well as poorly managed by

some. Mismanagement usually boils down to corrupt leaders at the helm.

 Taxation in Denmark is very high, with the total amount being ~55%. High taxes in

Denmark can be seen as an investment in the well-being of its citizens and the strength

of the nation. Danish enjoy   a comprehensive welfare system with universal access to

healthcare, free education, and generous social benefits. This supports individual well-

being and   promotes social equality, reducing poverty. By investing in high-quality

infrastructure and environmental sustainability, Denmark’s administration in this way has

created a robust foundation for economic stability and long-term prosperity. In this way,

high taxes are instrumental in building a resilient society.

I reiterate my point of the importance of proper management of these resources with an

example of Greece just a few years ago.

Greece is a country that struggled financially in the recent past. Alongside high tax

rates, it also faced widespread tax evasion and poor management of public funds

leading to financial instability. Austerity measures deepened the economic crisis,

leading to a recession. The failure to effectively collect and use taxes contributed to

Greece's prolonged economic struggles around the years of the financial crisis of 2008.

There are many countries that have succeeded in this aspect such as Sweden,

Germany etc. and many who have failed such as Greece, Zimbabwe, and others.

In all, taxes, when managed effectively, are the things that help build a country’s

infrastructure and development. I have emphasized the importance of the government

in managing these resources. This point extends to not only taxes but other revenues of

the government. I will illustrate this with the examples of the UAE and Venezuela, two

oil-rich nations with vastly different economic states in the present world.

The UAE has thriving oil & gas, tourism, and real estate industries, allowing for the

government to provide top-notch public services even with low taxes, and the citizens of

UAE (excluding migrant labor) to enjoy a high quality of life.

Moving on to Venezuela, it has the largest amount of proven oil reserves in the world. It

may be fair to think then that Venezuela should be a flourishing country. Yet, Venezuela

is in an economic crisis that started years ago, and the people are still suffering. This is

because of the political instability and widespread corruption. The crisis started in the

beginning of the 2010s decade and intensified after the recent government emerged.

Thus, even with such a large possibility of becoming a thriving country and even a

regional power, Venezuela is suffering due to economic mismanagement.

 This problem of a country being rich in resources but struggling due to mismanagement

and corruption in the administration is also seen in multiple African countries, who

despite being rich in minerals have their citizens living in extreme poverty.

 Thus, I conclude this article by emphasizing the importance of proper utilization and

implementation. Collecting the taxes is only the first step but unless managed properly

and fairly, it is of no use and a burden for citizens who have to bear with poor quality of

life even after paying chunks of their income.

Bibliography:

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2. Denmark.dk. "The Danish Welfare State." Denmark.dk. Government of Denmark, www.denmark.dk/society-and-business/the-danish-welfare-state.

3. Investopedia. "Taxes." Investopedia, www.investopedia.com/terms/t/taxes.asp#:~

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4. UAE Government. "Taxation." United Arab Emirates Government Portal. www.u.ae/en/information-and-services/finance-and-investment/taxation#:~

   =The%20UAE%20does%20not%20levy,borne%20by%20the%20end%20consumer.

5. DNA India. "Explained: How Do Countries with No Tax or Less Taxation Run Their Economy?" DNA India, www.dnaindia.com/explainer/report-explained-how-do-countries-with-no-tax-or-less-taxation-run-their-economy-3022154/amp.

6. Council on Foreign Relations (CFR). "Venezuela's Crisis." Council on Foreign Relations, www.cfr.org/backgrounder/venezuela-crisis.

7. World Vision. "Venezuela Crisis: Facts, FAQs, and How to Help." World Vision, www.worldvision.org/venezuela-crisis.

8. Investopedia. "Understanding the Downfall of Greece's Economy." Investopedia, www.investopedia.com/articles/investing/070115/understanding-downfall-greeces-economy.asp#:~

   =Greece%20defaulted%20on%20a%20debt,due%20to%20systematic%20tax%20evasion.