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Questions
Explain how indirect taxes can be inflationary.
Explain how indirect taxes prove to be inflationary.
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Solution
- Indirect taxes are known to cause significant inflation. Indirect taxes on commodities lead to higher market prices.
- Rising prices increase the cost of living, leading trade unions to seek greater salaries to maintain workers' real incomes.
- Indirect taxes perpetuate a cycle of rising prices, costs, wages, and further price increases.
RELATED QUESTIONS
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 |
Observe the relationship of the first pair of words and complete the second pair:
Tax paid by person on whose it is imposed : Direct tax.
A tax is paid by some person and the final burden is born by some other person : ______.
A policy under which the government uses its expenditure and revenue to produce desirable effect and avoid undesirable effects on the national income, production and employment. This defines ______.
Briefly explain why direct taxes foster civic consciousness among people.
Explain the term proportional taxation.
Define a tax.
Explain the term Impact of a tax.
Explain briefly two merits of indirect tax.
Citing reasons state the superiority of Progressive tax over regressive tax.
Citing reasons state the superiority of Fostering civic consciousness by direct tax over the same by indirect tax.
