Advertisements
Advertisements
Question
An indirect tax can be made progressive by imposing higher tax rates on luxuries. Justify the above statement.
Solution
The statement that "an indirect tax can be made progressive by imposing higher tax rates on luxuries" can be justified as follows:
- Indirect taxes, such as sales tax or VAT, are commonly regarded as regressive because they apply the same rate to all individuals, regardless of income.
- However, this system can be made more progressive by imposing greater taxes on luxury products and services primarily consumed by the wealthy.
- By raising tax rates on luxuries such as luxury automobiles, jewellery, designer clothes, and high-end equipment, the tax burden is more concentrated among individuals with higher incomes who can afford them.
APPEARS IN
RELATED QUESTIONS
______ are those taxes which are paid by the same person on whom they have been imposed.
Match the following and select the correct option:
| Column A | Column B | ||
| (i) | Taxes imposed on income and wealth | A. | Regressive |
| (ii) | Taxes imposed on goods and services | B. | Progressive |
| (iii) | A tax system where the rate of tax decreases with increase income | C. | Direct taxes |
| (iv) | A tax system where the rate of tax increases as income increase | D. | Indirect taxes |
Define a degressive tax.
An indirect tax is not always equitable. Give two reasons to support your answer.
Classify the following type of tax into direct and indirect taxes:
Entertainment tax
Classify the following type of tax into direct and indirect taxes:
Income tax
Give two reasons why the government imposes tax?
State two drawbacks of direct taxes.
Draw a neat labelled diagram for progressive taxation.
How does the state fulfil the following socio-economic objective?
Reducing income inequality.
