Question

“The government generally levies higher Goods and Services Tax (GST) on socially undesirable products like cigarettes, tobacсо, liquor, etc.”

Identify and explain the indicated government budget objective in the above statement.

Answer 1

The government’s budget goal is to raise the GST on socially undesirable goods to redistribute income and improve social welfare.

• Redistribution of Income and Wealth: A higher GST on bad things like cigarettes, tobacco, and alcohol makes people less likely to buy them and raises revenue from those who do. This money goes to public aid programs, which is a good way to redistribute wealth and help everyone.
• Social Welfare: Higher taxes make people less likely to buy dangerous products, which is good for public health and lowers social costs, such as healthcare costs. The money helps social aid programs, which improve society’s well-being.

Note: This type of tax, called the SIN tax, is levied on products and services that harm people’s health and well-being.