2016 · Q117
Which of the following statements are correct?
- 1Ability to pay principle of taxation holds that the amount of taxes people pay should relate to their income or wealth
- 2The Benefit Principle of taxation states that individuals should be taxed in proportion to the benefit they receive from Government programmes
- 3A progressive tax takes a larger share of tax from poor families than it does from rich families
- 4Indirect taxes have the advantage of being cheaper and easier to collect
Select the correct answer using the code given below:
General KnowledgeIndian Economy
- A1 and 3 only
- B2 and 4 only
- C1, 2 and 4 only
- D1, 2, 3 and 4
Explanation
Statement 1 correctly states the ability-to-pay principle: tax burdens should relate to income or wealth. Statement 2 correctly states the benefit principle: taxes should track benefits received from government programmes. Statement 3 is false: a progressive tax takes a larger share from the rich, not the poor (the described tax is regressive). Statement 4 is true: indirect taxes are collected at a few points in the supply chain and are cheaper and easier to administer. Statements 1, 2 and 4 are correct, option (C).