Multiple choice

The main purpose of imposing taxes especially in poor country is

  1. collection of revenue

  2. providing protection to domestic industry

  3. increasing rate of capital formation

  4. regulation of consumption and production of harmful products
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It is the main purpose. The revenue collected through taxes can be used for development of agriculture and industry and to provide infrastructural facilities in poor countries. Thus, entrepreneur can be encouraged to set up industries in backward regions and hence capital formation is increased. In rich countries, the rate of capital formation is already high.

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