Why Tax is necessary even when it leads to inefficient allocation of resources? The taxes are simply one of the most realistic ways for a government to raise money from our spendings on the things that we use on daily basis or on majority of the time. The tax is most appropriate system for government until anybody comes up with more optimum solution. The ideal tax structure for nations would provide the necessary revenue without placing an undue burden on the public purse, without inhibiting economic growth, and without diverging much from international tax norms (Slemrod, 2015). Taxes are also used to control numerous economic indicators like inflation to control the economy. When trying to set up effective tax systems, developing nations encounter enormous obstacles. Some of them are as follows:

2. A large number of people in developing economies have unregulated work for example agriculture business which largely depends upon the weather for most of them, unofficial businesses like selling toys on road, etc (Krulick & Krulick, 2022). It becomes hard to determine a perfect tax system as the income is not consistent and mostly deals are made up in cash. Workers in these nations also tend not to spend their wages in large retailers who maintain precise records of sales and stock (Krulick & Krulick, 2022). With all these methods of generating incomes, the predetermined system of taxation have an insignificant impact on these economies. Also, it is not in a favour of the government to impose large taxes on them.
4. It is quite hard for the government to design an effective system for tax when large part of economys workforce is not trained and educated. A formal at some level becomes necessary to understand the ongoing tax design. Hence, rather than having an effective system the governments tend to have a system that would be least resisting. Government make policies to use alternative systems to get taxes from them. I think this mostly affect the taxpayer negatively.
6. The statistical and tax departments struggle to produce accurate figures due to the informal nature of the economy in many developing nations and to a lack of funding. It is hard for the policymakers to track the impact of the changed tax policy because of the unavailability of good data. This is because the marginal changes happens rather than structural changes in tax system. This keeps outdated tax systems in place which affect the tax revenue and taxpayer both negatively.
8. In emerging nations, income is frequently allocated inequitably. The rich should be taxed more heavily than the poor in this situation to raise large tax revenues, but because of their wealth and political influence, wealthy taxpayers frequently have the ability to block fiscal measures that would increase their tax burdens. This helps to explain why a lot of developing nations haven\'t completely tapped into personal income and property taxes and why their tax systems rarely achieve adequate progressivity in other words, where the rich pay proportionately more taxes.

In conclusion, rather than pursuing the ideal tax system, tax policy changes based on the need of government in developing nations. It is also found that big corporates exempt from paying their taxes due to loopholes in the ongoing tax systems of the government. They take into account these difficulties from both a macroeconomic (the volume and makeup of tax income) and a microeconomic (aspects of the creation of particular taxes) standpoint. How should be a Correct Tax System look like? The design of the tax system should be as neutral as feasible in emerging nations where the role of market forces in resource allocation is becoming more and more essential in order to reduce interference in the allocation process. In order to make it evident whether the system is not being applied as intended, the administrative processes for the system should be clear-cut and visible. Income Tax on Individuals Any discussion of personal income tax in developing nations must begin with the fact that most of these nations have received relatively little money from this tax, and that there aren\'t many people subject to it due to the low income bracket. Most governments in developing nations have access to the most visible policy instrument to demonstrate their commitment to social justice and, as a result, win political support for their initiatives (Hamid, 2020). This is the rate structure of the personal income tax. Many nations place a high value on maintaining a certain level of nominal progressivity in this tax by using numerous rate brackets, and they are hesitant to enact measures that would lower the number of these brackets. The majority of the time, however, significant personal exemptions and the abundance of additional exclusions and deductions that benefit individuals with high incomes severely undermine the effectiveness of rate progressivity (for example, the exemption of capital gains from tax, generous deductions for medical and educational expenses, the low taxation of financial income) (Shvetsov, 2007). Because these deductions often increase in the higher tax brackets, tax assistance through deductions is especially obnoxious. Experience strongly implies that by reducing the degree of nominal rate progressivity, the number of brackets, and the number of exemptions and deductions, effective rate progressivity could be enhanced (Shvetsov, 2007). In fact, the personal income tax system would only need a few nominal rate levels to achieve any meaningful fairness target. A significant increase in fairness might still be made even if political obstacles prohibit a thorough restructure of rates by switching deductions for tax credits, which would benefit taxpayers in all tax categories equally. The effectiveness of a high marginal tax rate is also significantly diminished by the fact that it is frequently applied at income levels that are so high that only a small portion of income is subject to these rates. Before a taxpayer\'s income reaches the highest rate band in several developing nations, it must be hundreds of times higher than the per capita income. Furthermore, there are considerable incentives for taxpayers to adopt the corporate form of doing business for tax-related reasons in some nations where the top marginal personal income tax rate is significantly higher than the corporation income tax rate (Hamid, 2020). Professionals and small business owners are able to permanently avoid paying the highest personal income tax by effortlessly syphoning off profits through cost deductions over time. A delayed tax is a tax evasion (Hamid, 2020). Therefore, sound tax policy ensures that the highest marginal rate of the personal income tax does not considerably diverge from the corporate income tax rate. Along with the issue of exclusions and deductions tending to reduce the tax base and undermine effective progressivity, many developing nations\' personal income tax structures also gravely violate the two cornerstones of sound tax policy: symmetry and inclusivity. The symmetry principle means an equivalent treatment of tax system for profits and losses of all source of income. Losses ought to be deductible if the gains are taxable. The inclusivity principle has to do with including a stream of income in the tax net at some point in the stream\'s journey. For instance, a payment should not represent a payer\'s expense if the payee is exempt from paying taxes on it. Distortions and injustices typically result from violating these principles. References Hamid, N. (2020). Determinants of Tax Compliance among Individual Tax Payers in Malaysia.Journal Of Advanced Research In Dynamical And Control Systems,12(3), 316-321. doi: 10.5373/jardcs/v12i3/20201196 Shvetsov, Y. (2007). Russia\'s Tax System: Is It Possible to Correct Existing Draw-backs?.Voprosy Ekonomiki, (4), 140-145. doi: 10.32609/0042-8736-2007-4-140-145 Slemrod, J. (2015). Tax Administration and Tax Systems.SSRN Electronic Journal. doi: 10.2139/ssrn.295