Question

Explain the Indirect tax can be used to increase social welfare.

Answer 1

Indirect taxes can be used to increase social welfare through various ways:

1. The government can use indirect taxes to help low-income citizens afford and access critical goods and services.
2. Indirect taxes can promote socially favourable consequences. For example, taxes on damaging commodities to health and the environment.
3. The government can allocate a percentage of indirect tax revenue to support social welfare projects for disadvantaged or vulnerable people.