8 non-revenue purposes of taxation

The primary purpose of taxation is revenue. Tax is forcibly collected from the people in order to raise funds for the operation of the Government.

However, taxation has purposes other than revenue, or "non-revenue purposes". They are also called "special" or "sumptuary" purposes. There are visions or conditions that the Government may want to achieve and taxation is a good tool (power) to use. They are the following.

[1] Tax can strengthen anemic enterprises or provide incentive to greater production through grant of tax exemptions or the creation of conditions conducive to their growth. This is why there are economic zones in the Philippines; economic activities within these zones may be exempt from certain taxes as provided by law.

[2] Tax can protect local industries against foreign competition by imposing additional taxes on imported goods, or encourage foreign trade by providing tax incentives on imported goods. There are dumping taxes in place in order to protect local products.

[3] Tax can be a bargaining tool by setting tariff rates first at a relatively high level before trade negotiations are entered into with another country.

[4] Tax can stop inflation in periods of prosperity to curb spending power; ward off depression in periods of slump to expand business.

[5] Tax can reduce inequalities in wealth and incomes, as for instance, the estate, donor's and income taxes, their payers being the recipients of unearned wealth or mostly in the higher income brackets.

[6] Taxes may be levied to promote science and invention or to finance educational activities, or to improve the efficiency of local police forces in the maintenance of peace and order through grant of subsidy.

[7] Tax can be an implement of the police power to promote the general welfare.

[8] Tax can be a tool in the exercise of eminent domain.In every nation state, tax policy – i.e., the design of the tax system – has been, on many occasions, intentionally and pervasively employed to indirectly regulate certain economic sectors and activities, or to advance economic and social reforms by encouraging or discouraging certain taxpayers’ conducts. Governments have used their tax sovereignty to promote a variety of non-revenue-raising public policy goals in the following ways:

[1] To foster national industrial development through the imposition of tax restrictions on foreign products;

[2] To help sectors which suffered from industrialization itself through tax incentives or tax reductions;

[3] To favor certain businesses over others by granting tax breaks;

[4] To punish particular economic sectors or activities through denials of tax breaks, increases in the tax rates or extension of the tax scope;

[5] To advance social justice and equality among social classes by graduating the tax rates or by granting tax breaks to specific groups of taxpayers;

[6] To make, by means of new special-customized taxes, businesses or consumers internalize certain negative externalities provoked by their behaviors; and

[7] To further foreign policy by providing differentiated punitive or more favorable tax treatments to certain goods according to the country where they arise from. www.law.nyu.edu..