The following are the objectives of taxation:

  1. To increase the revenue for the welfare of the state
  2. To maintain equitable distribution of income and property
  3. To increase the production of particular goods
  4. To increase the employment, saving and investment of the country
  5. To minimize regional disparity
  6. To implement government policy
  7. To control the production of specific goods

Tax is the most important source of income or revenue for the government. Tax is a liability of a person or an organization to the state or government. It is paid by persons or organizations out of the incomes earned by them. It is a compulsory levy which is paid for the government without getting direct benefit from it. Tax is collected from the people and spent on administrative and developmental activities of the country.

According to Seligman, “Taxation is the compulsory payment made by a person or organization to the government to meet the expenses incurred in the common interest of the people and nation without getting any special benefit.”

From the above definition, it is clear that taxation is the compulsory contribution made by the individuals and organizations to the government out of their incomes to meet the expenses of the country.