Analysis

1. Taxable capacity:

Taxable capacity refers to the ability to pay tax and have substantial amount for life purposes. Taxable capacity also refers to the predicted tax to gross domestic product ratio that can be estimated empirically, taking into account a country's specific macroeconomic, demographic, and institutional features, which all change through time.

The following are the reasons why taxable capacity in less developed countries is low;

Corruption. The taxable capacity in less developing countries tends to be low due to corruption activities conducted by officials assigned for tax management in those less developing countries. This will result to low taxable capacity in those less developing countries.

The size of population: Taxable capacity is very much affected by the decrease in national income and by the rate of growth in population. If the increase in national income is greater than the growth in population, the per capita income goes up. The taxable capacity of the individuals rises. If the rate of growth of population is higher than the national income, the taxable capacity decreases.

Standard of living of people: If standard of living of people is high, they work more efficiently so that they may enjoy a still better standard of living. When they work enthusiastically, they receive higher wages from their employers. Taxable capacity tends to increase then.

Psychological factor: Psychological factor, is a very important factor in determining taxable capacity of a nation. If people are satisfied that government is doing its utmost to raise standard of living of masses and in maintaining prestige of country, then they try to sacrifice their lives what to say of money for the government. A simple approach to patriotism brings forth tons of gold.

Purpose of taxation: Purpose of taxation has a direct bearing on taxable capacity of a nation. If citizens of country are satisfied with purpose of taxation i.e., the increase in welfare of people, then they...