Question

State the four merits of a direct tax.

Explain in brief two merits of a direct tax. 

State two merits of direct taxes.

Briefly explain any two merits of direct taxes.

Mention three merits of direct taxes.

Answer 1

The following are the merits of direct taxes:

1. Economy: Direct taxes are economical in the sense that the cost of collection of these taxes is relatively low, because the same officers who assess small income or properties can also assess large income or properties. Moreover, the tax-payers make the payment of these taxes direct to the government.
2. Equity: Direct taxes are based on the principle of ability to pay (or principle of progression). So the burden of a direct tax is equitably distributed on different people and institutions. They fall more heavily on the rich than on the poor.
3. Certainty: Direct taxes are certain. The tax-payer knows how much tax is due from him and when and so he can adjust his income and expenditure. The government also knows fairly well the amount of revenues coming to it by way of direct taxes and can adjust its income and expenditure.
4. Elasticity: Another merit of direct taxes is that they are based on the canon of elasticity. These taxes are elastic in nature as the government revenue can be increased by raising the tax rates in times of crisis. Moreover, the yield from direct taxes goes up automatically with increase in income of the people.