What is the principle of cost sharing and to what extent does it influence the level of taxation?

The principle of cost sharing refers to the requirement for the members of society to share in/or supplement the total cost of provision of public goods and services by Government.

This is usually in appreciation of the following facts:

  1. That there is an ever-increasing requirement for Government to provide goods and services which continually puts greater pressure on limited resources available to the state.
  2. That members of society view projects for provision of public goods and services as their own such that they cultivate sense of ownership and accountability.
  3. That whereas public goods are for benefit of all, it would be fair to introduce the element of a charge on or contribution by those directly benefiting from such projects rather than entirely depend on taxation of all.
  4. Cost sharing may affect level of taxation such that rather than raise taxes to generate extra funds cost showing is used to target persons directly benefiting from the individual project/service or good. This can only apply where society has enough disposable income left in their hands after taxation. In a situation of general poverty and increasing pressure on Government to provide essential services and goods cost showing would be minimal and as such taxation would still be high or public debt would increase.
Share through

Leave a Reply

Your email address will not be published. Required fields are marked *