Let’s be honest: no one likes paying taxes. Oftentimes people complain about paying too much of it or about other people that aren’t paying enough.

But taxation is a topic that should not be avoided. It is important for many different reasons as it touches the lives of each plus every one of us.

In fact, how we tax, who we tax, plus why we tax determines the kind of society we become.

The purpose plus impact of taxation can be divided into four categories:

Generating Resources
Equity plus Growth
Behavior
Social Contract

Taxes Generate a Country’s Resources
The most important purpose of taxation is to lift resources for governments to deliver essential public services. Taxes pay for many of the things that are fundamental to functioning societies around the world, such as health care, schools, plus social services.

Studies have shown that the bare minimum tax revenue for countries is at least 15 percent of gross domestic produk in order to be able to provide basic services to their citizens.

But it is important to look at both sides of the equation – not only taxes collected, but also how the money is spent to improve citizens’ lives plus well-being.

Many scholars suggest that there is a strong correlation between taxation plus happiness. Year after year, countries that rank in the top ten of happiest countries around the world, are those with the highest tax rates.

The positive link between tax plus happiness is fully mediated by citizens’ satisfaction with public services. In short: because of higher taxes paid by citizens, the government can provide a better life for its citizens with social benefits, healthcare, education, employment, plus better infrastructure among others – resulting in happier citizens.

Equity plus Growth
Next to being a source of revenue, taxation has the potential to be a powerful tool for stimulating development in a country.

Corbacho et al. make a case for the reform of fiscal plus tax systems to progressive systems that help promote economic growth, mobility, plus social equality. “Taxation is more than revenue. It is a tool for development.