National security is among the top priorities in the running of many governments. In the U.S., for instance, national security is considered a priority expenditure by the government in the post 9/11 era. Government revenue and state of security in a country are closely related aspects. A country can only secure its borders as much as its financial resources allow. National security involves huge expenses which, when not carefully considered, could lead to straining of the country’s resources. Inefficient taxation has potential negative impacts on a country’s security. Similarly, insecurity within a country leads to a decline in tax collection by the designated institutions.
Impacts of National Insecurity on Taxation
National security dictates the trajectory of economies around the world. There are several considerations that investors, local and foreign, look at before investing in a country. One of the essential considerations is the security of the investments. Secure countries provide a conducive environment for business growth. National security impacts taxation in the following ways:
Increasing domestic demand abroad - One of the main goals of national security is to improve the perception of other countries about the nation. Improving how people in other countries view a nation attracts foreign investments. The increased cash flow injection from foreign businesses is taxable hence contributing to the country’s revenue. Additionally, employment opportunities created to increase the country’s tax net in terms of personal income taxes. Fewer taxes are charged per individual or business when an economy has many productive people and businesses.
Businesses’ security- Protecting public and private investments is one of the key steps to boosting economic growth in a country. Loss of business property and human resources due to criminal and terror activities discourages investments. As a result, a country may have fewer taxable institutions and individuals. Securing investments ensures a consistent supply of essential goods and services needed for economic growth. Availability of development-oriented services increases the productivity of citizens; more revenue is collected as a result of such.
Regulation of imports and exports- In the global economy, products of varied quality and use are manufactured and distributed across national borders. The National security service in the United States plays an important role in ensuring quality and human-friendly products enter the country’s borders. An influx of substandard substitute products poses a threat to the local manufacturing industry. Potential business failure due to unfair competition from counterfeits has a negative impact on domestic revenue collection. That is, lesser taxable individuals and businesses will be available for revenue collection. Life-threatening products such as narcotics lower the productivity of the country’s population. Prevention of entry and consumption of such products ensures maximum productivity within the country’s citizenry.
Impacts of Taxation on National Security
National security is among the top expenditures by many governments. This implies that it is directly affected by the amount of taxes collected in the concerned country. Countries with well-established taxation policies are guaranteed sufficient revenue collection by the designated bodies. Availability of funds to governments makes it easier to implement national security policies. Investments in security personnel training and national security-oriented technology can be achieved with sufficient revenue collection.
Taxation has a direct impact on the cost of living within a country. Higher taxes implies that the cost of living goes up. Taxes on consumer products, e.g., Value Added Taxes, have an effect on the pricing of the products within an economy. When such taxes are too high, the cost of living becomes unbearable, leading to uncertainty and potential unrest. Citizens are likely to revolt when taxes are too high; in such cases, the country’s administration could be viewed as being oppressive.
How governments balance taxation and national security
To maintain an equilibrium between taxation and national security matters, the government consults tax experts. These experts formulate policies that are implemented by the revenue collection agencies and budgeting committees. The policies created leave room for the involvement of third-party service providers to help every eligible citizen and business organization in an economy file their returns.
SIMPLETAX is one of the legally registered firms offering tax-related services to citizens within the U.S. The firm has skilled professionals with knowledge of all types of taxes. As a taxpayer, contracting SIMPLETAX helps you monitor your financial transactions throughout the year and file the right amount of taxes. Bookkeeping and tax records keeping, also offered by SIMPLETAX, are essential in running businesses. When being audited, the law allows auditors to look back up to three years of financial and tax records, you will be covered with SIMPLETAX's help.