4.2   Tax

The origin of the word "tax" is from "taxation," which means an estimate. Taxation is a means by which governments finance their expenditure by imposing charges on citizens and corporate entities. The main purpose of taxation is to accumulate funds for the functioning of the government machinery. Tax has come into forefront on account of the new concept called “welfare state”.

Taxes are compulsory payments to government without expectation of direct return (or) benefit to the tax payer. Prof. Seligman also defined a tax as “a compulsory contribution from a person to the government to defray the expenses incurred in the common interest of all, without reference to special benefits conferred”. Tax system Every type of tax has some advantages and some disadvantages.

So we have a tax system, that is, a collection of variety of taxes. From Adam Smith, many economists have given lists of canons of taxation. It is important to recall those common among them for discussion here.