Challenges in Taxation and the Effect on National Revenue: A Case Study on India and Liberia

William M. Johnson

doi:10.36948/ijfmr.2026.v08i01.70146

Challenges in Taxation and the Effect on National Revenue: A Case Study on India and Liberia

Author(s)	Mr. William M. Johnson
Country	India
Abstract	Taxation is crucial in every economy, serving as the primary source of government revenue to finance public services, infrastructure development, and social welfare programs. It is also a key instrument for promoting economic growth, reducing income inequality, and managing economic stability. Taxes provide the necessary funds for the government to operate and carry out its essential functions, including national defense, law enforcement, and public administration. Tax revenue is invested in critical infrastructure projects like roads and railways, which are essential for overall economic activity and growth. The government uses taxes to fund essential services such as healthcare (government hospitals and medical research) and education (government-funded schools and universities). The overall goal of taxation in economic development has not been achieved over time due to weak administrative capacity, a large informal economy, political constraints like corruption and politically motivated exemptions, and the negative economic effects of high or complex tax systems that can discourage investment and compliance. Developing countries also struggle with identifying taxable surpluses, a lack of reliable data, and resistance to tax reforms. Coupled with these is the existence of complicated tax structures wherein tax laws are often extensive and complex with numerous sections, amendments, and exemptions, making compliance difficult and costly for both individuals and businesses. This complexity creates loopholes and opportunities for avoidance. Another significant factor contributing to the ineffectiveness of taxation is the inability to achieve a balance between revenue generation, economic efficiency, and social equity in a complex, globalized world. Multinational corporations (MNCs) use complex strategies to artificially shift profits from higher-tax to lower-tax jurisdictions, eroding the tax base of many countries.
Keywords	Inflation, Employment, Taxation, National Revenue, Tariff, Income Inequality, Investment.
Field	Sociology > Banking / Finance
Published In	Volume 8, Issue 1, January-February 2026
Published On	2026-02-27
DOI	https://doi.org/10.36948/ijfmr.2026.v08i01.70146

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Challenges in Taxation and the Effect on National Revenue: A Case Study on India and Liberia

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