The flow of credit information to small-scale farmers in Zambia : capacity building

Abstract

Taxation from time in memorial has being a source of revenue for the state to provide social goods for use by the whole citizens. States have used different tax system in order to meet revenue needs. However, some individuals and corporations have not been willing to meet their tax obligations voluntary. It is for this reason that the revenue collecting agency whether central or local government have to devise suitable mechanism for collecting taxes. Tax law operates as a legal enforcement tool to ensure tax compliance by tax payers. Like anywhere else in the world, tax payers have come up with means of evading their tax obligations or engaging in outright avoidance. This creates a xgrey economy' also known as the 'shadow economy'. The shadow economy is that part of income that is earned but can not be capture in national income or financial records. This distorts planning of a national economy as available official information is inaccurate hence the creation of a Parallel structure. A better understanding of the shadow economy will assist in the design of an optimal tax system. Tax legislation is important in that it can either encourage the formation of the shadow economy, discourage it or ultimately avoid the existence of one. Tax legislation is cardinal in tax administration as it gives the collecting agency the legal back-up to manage the collection of such taxes.