Public Finance and Taxation

It is regressive tax.
In regressive tax, the rate of tax decreases as the income of the tax payer increases.

It is a proportional tax.
In this type of tax, all the incomes are taxed at a uniform rate whether low or high, and it is not linked with the income of tax payer. Hence, in this type of tax the income is taxed at a uniform rate.

It is custom duty.
Custom duty is an indirect tax. Hence, its impact and incidence falls on different persons. The custom duty is paid by the importer of the commodity, but is charged from the customer to whom the commodity is sold, as it is included in the price. Hence, its impact falls on the importer and its incidence falls on the consumer who ultimately pays for it.

It is income tax.
The income tax is a direct tax. As the income tax is charged on the income or salary of the person, the tax payer can evade it through fraud or cheating. The individual may show that his income does not come within the tax slab and thus evade it.

It is wealth tax.
The wealth tax is imposed on the wealth that possesses wealth like shares, cars, etc. It is to be paid by the person who has the wealth and its impact and incidence falls on the same person, as its burden cannot be shifted.

It is income tax.
The income tax is the tax, which is deducted at source from the salary of the employees. When a person gets his or her salary, the income tax is deducted before he or she takes the salary to his or her home.

It is tax.
The tax collected by government is used for common benefit of all people by construction of roads, improving infrastructure, providing health facilities to the citizens of country. Hence, the tax is used for common benefit of all people whether they pay the tax or not.

It is a border tax.
The custom duty is a tax charged on the goods imported from the foreign countries and the goods exported to foreign countries. As in this the goods cross the border of two countries, it is a border tax.

It is not a demerit of tax, but a merit of direct tax.
Direct tax is flexible that is the rate of direct tax can be increased or decreased according to requirements of economy. In case of emergency, the rates of tax can be increased to have larger revenue, and in case of depression the rate of tax can be decreased as the people do not have much to pay.

It is a non-tax revenue.
The grants in aid are non-tax revenue for the government. The grants in aid are the aid or assistance received from foreign countries as well as from international organisations. It is not a tax imposed on anything. Hence, it is non- tax revenue for the government.

It is an example of Ad Valorem Tax.
The import duty is an example of Ad Valorem Tax as the import duty is imposed according to the value of commodity. The tax imposed according to the value of something is Ad Valorem Tax.

It is not a characteristic of a good tax system
The good tax system must be elastic or flexible and not inelastic. It means that the tax system should be such that the rate of tax can be increased or decreased according to the needs of the economy. For instance, at the time of inflation when people have more purchasing power, the tax rate must be increased to reduce their purchasing power and curb inflation.

It is Central Value Added Tax.
The full form of CENVAT is Central Value Added Tax.

This is not a valid reason for resorting to deficit financing. When there is political stability, the government does not change frequently. Thus, expenses on voting and elections are minimised and the government does not have to resort to deficit financing to meet the expenses on elections. In fact it reduces deficit financing. Thus, political stability is not the reason for resorting to deficit financing.

It will increase the value of money.
When new currency notes are not issued by the government, it will not put extra purchasing power in the hands of people. The quantity demanded by people will also not increase. Hence, the prices will remain stable. Thus, the value of rupee will not decrease.

It is import duty.
The import duty is charged for importing products from foreign countries. The importer sells the product to the consumer after adding it in the price of goods. Thus, when the consumer purchases that product, he has to incur the expenditure for purchasing that product and has to pay import duty as well. Hence, the import duty is imposed on expenditure of tax payer.

It is not an objective of imposing tax.
The tax is not imposed for reducing dependence on foreign countries. The dependence on foreign technology, for instance, cannot be reduced by imposing tax.

It inculcates civic consciousness.
The income tax is a direct tax and is charged from the salary or income of tax payer. The tax payer knows how much tax he or she has paid. Hence, the tax payer takes interest in seeing that these funds are properly utilised. This public awareness helps in checking the wastage of public expenditure.

This tax cannot be shifted.
The perquisite tax is to be paid on the non-monetary benefits provided by employers to its employees like car provided with driver, medical reimbursements etc. The tax on non-monetary benefits provided by the employer to its employee is to be paid by the employer and it cannot be shifted.

Progressive tax is based on principle of equity.
In the progressive tax, the rate of tax increases as the income of tax payer increases. Hence, the rich people are taxed at higher rates than the poor people. Therefore, the rich people pay more, and the revenue collected is used for the welfare of the poor. Thus, progressive tax is based on principle of equity.

The value added tax satisfies the canon of diversity.
The value added tax is imposed on the value added in the goods and services from the production to retail stage. Hence, value added tax is imposed on a variety of goods and services and rich as well poor people contribute to it. Thus, it satisfies the canon of diversity.

It is custom duty.
The custom duty is charged on goods imported from foreign country, which are domestically available and thereby encourage the domestic industry. The heavy custom duty is imposed so that the citizens of a country have to pay a very high price for it and hence they are forced to buy domestic products.

It is sales tax.
The sales tax is to be paid on the goods purchased by the consumer. The rich have to pay the same rate of tax as the poor. For instance, the rich have to pay the same rate of tax as the poor on the brand of Babool toothpaste. But the poor people feel more burden as they have less money. Hence, sales tax is considered unjust.

This is not a characteristic of tax.
A tax is not levied for any specific purpose and the individual cannot ask for special benefit from the state in return for the tax paid. The quid pro quo means more or less equal exchange in return of paying something, but as the individual cannot demand anything in return of tax paid; quid pro quo is not a characteristic of tax.

It is canon of expediency.
According to canon of expediency, the tax should be based on sound principles so that it requires no justification from the side of the government. The tax payer must find it just and fair to impose tax. When it is so, the canon of expediency is followed.

It is known as escheat.
When government acquires the property of a person who does not have any legal successor or heir, it is escheat. Hence, acquiring the property of a person who does not have any legal successor is known as escheat.