Explain briefly two merits of indirect tax.

Answer in Brief

Merits of indirect tax are as follows:

Indirect taxes are convenient to pay because they are paid in small amounts and are included in the price of the commodity. Taxpayers do not feel the burden of these taxes.
Indirect taxes can be used to increase social welfare. The consumption of goods which are undesirable and harmful such as wine, cigarettes, etc. can be discouraged by imposing heavy taxes on them.

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Role of State in Economic Development

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Chapter 6: The State and Economic Development - QUESTION BANK [Page 187]

Chapter 6 The State and Economic Development
QUESTION BANK | Q 12. (iii) | Page 187

The government imposes tax ______.

Instrument of monetary policy is:

Match the following and select the correct option:

	Column A		Column B
(i)	Taxes imposed on income and wealth	A.	Regressive
(ii)	Taxes imposed on goods and services	B.	Progressive
(iii)	A tax system where the rate of tax decreases with increase income	C.	Direct taxes
(iv)	A tax system where the rate of tax increases as income increase	D.	Indirect taxes

The state can promote economic development by ______.

Which of these taxes is most likely to be progressive?

Distinguish between fiscal policy and monetary policy.

Citing reason state the advantage of a direct tax over an indirect tax.

Classify the following types of tax into direct and indirect taxes:

Explain the term proportional taxation.

An indirect tax can be made progressive by imposing higher tax rates on luxuries. Justify the above statement.