Question

Explain essential characteristics of tax.

Answer 1

Essential characteristics of tax: Some essential characteristics of tax are as follows:

1. Compulsory contribution: A tax is a compulsory contribution to the government and every citizen of the country is legally bound to pay the tax imposed upon him/her. It is a major source of revenue for the government. If any person does not pay a tax, he/she can be punished by the government.
2. Payment for the common interest: Tax is imposed on the taxpayer by the government to enable the government to incur expenses in the common interests of the society.
3. No direct and proportionate benefit to the taxpayer from the payment of the tax: The payment of a tax by a person does not entitle him/her to receive any direct and proportionate benefits or services from the government in return for the payment of the tax.
4. Direct or indirect imposition: Tax is directly imposed on income or property. It is indirectly imposed on various commodities and services.