Origin of Administrative Theory. In other words, taxation policy has some non-revenue objectives. The theories are: 1. Introduction: Keynes mentioned several subjective and objec­tive factors which determine consumption of a society. Psychology Reports, 9, 292–334. Life Cycle Theory of Consumption 3. Among the purposes of a tax system, it is generally accepted that one role is to implement a society’s conception of distributive justice. Production Cycle Theory of Vernon Production cycle theory developed by Vernon in 1966 was used to explain certain types of foreign direct investment made by U.S. companies in Western Europe after the Second World War in the manufacturing industry. But it is not the only goal. The theory argues that the more debt is, the more a firm’s value is created. Alex Edmans, Xavier Gabaix & Dirk Jenter. benefit from debt tax shields. In classical economics, the theory of firms is based on the assumption that they will seek profit maximisation. However, the same is not the case with dividends paid on equity. The theories presented in this section focus on the importance of human needs. Ibn Khaldun is again the first economist, with economic surplus at hand, who has given a biological interpretation of the rise and fall of the nations. Eron, L. D. (1961). Behavior Research and Theory. It is based on the false assumption that there are successive infinitive transactions. ), Application of role and learning theories to the study of the development of aggression in children. The principles of taxation, that is, the appropriate criteria to be employed in the development and evaluation of the tax structure, have received attention from the days of Adam Smith. ADVERTISEMENTS: This article throws light upon the top three theories of dividend policy. 577–581. Twitter LinkedIn Email. In other words, some people are born to become leaders and leadership is a heroic act. Google Scholar. There are two types of tax in india i.e. It is difficult to fit into one neat theory because of the problem of definition; secondly any theory of FDI is almost inevitably a theory of MNCs. Theory # 1. A common thread through all of them is that people have a variety of needs. Agency theory can be applied to the agency relationship deriving from the separation between ownership and control. Mercantilism. Theories in more detail. Stakeholder theories advocate for some form of corporate social responsibility, which is a duty to operate in ethical ways, even if that means a reduction of long-term profit for a company (Jones, Freeman, & Wicks, 2002). Theories of FDI may be classified under the following headings: 1. Ibn Khaldun, moreover, dealt with the problem of optimum taxation, minimum government services, incentives, institutional framework, law and order, expectations, production, and the theory of value. (1) Proportional Tax (Flat Tax): A proportional tax is a tax whose burden is the same rate regardless of the income earned by the household. When we are hungry, for example, our need for food has been energized. Working Paper 23596 DOI 10.3386/w23596 Issue Date July 2017. Theory of Optimal Taxation (e.g., broad base, low rate, tax less-elastic activities) I could go on, but you get the idea. Most governmental activities must be financed by taxation. theories of class and social stratification – iii SOCIAL CLASS AS SUBCULTURE SOCIAL MOBILITY:Structural factors, Individual factors, Costs Wagner’s Hypothesis: Adolf Wagner a noted German political economist (1835-1917) pro­pounded an empirical law to analyses and explains the trend in the growth of public expenditure. The theories are: Theory # 1. Income Tax Rules, 1962: Central Board of Direct Taxes (CBDT) is the body which looks after the administration of Direct Tax. In fact, different writers have formulated the different theories, at different times, relating to the equitable distribution of the burden of taxation among the people. In principle the economically optimal levels of subsidy and taxation can be calculated in respect of positive and negative externalities, etc. Despite ‘second best’ problems, it is generally accepted that governments should promote competition as far as possible. Finance Act: Every year Finance Minister of Government of India presents the budget to the parliament. According to this theory, any tax is shifted automatically in the economic system ad infinitum such that every person in the economy bears the burden of the tax. Eron, L. D. (1982). 47) Value of firm = Value if all-equity financed + PV(tax shield) - PV(cost of financial distress) The trade-off theory can be summarized graphically. In the end the amount of tax borne by an individual in the system is so small that it is practically burden- less. Google Scholar. Thirdly, the nature of FDI makes it a multidimensional subject within the sphere of economics as well as an interdisciplinary one. as well, and thus inseparable from the theory of the firm. Share. For example, because imported products are easier to tax than domestic output, import duties were among the earliest taxes. Gordon’s Model. Truly speaking, in the modern world, taxation is used as an instrument of economic policy. Wagner argued that a functional, cause and effect relationship exists between the growth of an industrializing economy and the relative growth of its public sector. Parent—child interaction, television violence and aggression of children. The Great Man Theory: Thomas Carlyle proposed the Great Man Theory in the 1840s, and it merely believes that leadership is an inherent trait of a person who is destined to become a great leader by birth and they prove themselves when the great need arises. In L. D. Eron (Ed. 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