Financial sectors are industries that deal with managing money. Globally, the financial sector gains a lot of scopes as it deals with earnings and equity market capitalization.
What Are Financial Sectors?
A financial sector is a sector that comprises of firms and institutions that aim to provide financial services to commercial and retail customers. The industries that fall under the financial sectors are banks, real estate firms, insurance companies and investment companies. The health of an economy greatly depends on the financial sectors. Stronger the financial sector, stronger the economy. Weaker the financial sector, weaker the economy.
The socio-economic developments of certain countries not only depend on the physical resources that are available but also financial resources.
Why Invest In a Financial Sector?
The overall health of a country’s economy is defined by the holistic health of the financial sector. Financial institutions provide mortgages for house owners, loans for business owners and also insurance for consumers. If there are restrictions imposed on such activities, the growth of small businesses is likely to get hampered.
What Are The Major Objective Of Tax And Regulatory Services In Financial Sectors?
The primary purpose of inducing taxes is to raise revenue so that huge public expenditure is met. Most of the taxation policies have non-revenue objectives as well.
Some of the objectives include:
One of the major objectives of taxation is economic development. The growth of capital formation greatly influences the economic development of a country. The government taps tax revenues to bring about an improvement in both private and public investment. With proper tax planning, the ratio of savings to national income is most likely to increase.
Properly planned tax and regulatory services will lead to full employment in a country. If a country wants to achieve full employment, then the country must work on cutting down the rate of taxes. If this happens, the demand for goods and services will rise because of the rise in income.
Taxes can control cyclical fluctuations
Another major objective of taxation is getting the economy in control during the period of boom and depression. During a depression in the economy, the taxes are lowered and during a boom in the economy, taxes are increased. This way the cyclic fluctuations can be dealt with.
However, there is a certain limit to tax financing. This is because of the limited ability to pay taxes. Majority of people in India have a low income. Therefore, taxes cannot be used for mobilizing resources. If the available resources are used judiciously, rapid economic development can be met.
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