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Questions
Explain the term Impact of a tax.
What is meant by impact of taxation?
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Solution
The term impact is used to express the immediate or original imposition of tax. The impact of tax is on the person on whom it is imposed first i.e., the person who is liable to pay tax to the government.
RELATED QUESTIONS
Under ______ the rate of tax increases with rise in tax payer's income.
Fiscal policy means public expenditure and tax policy of the government.
The state can promote economic development by ______.
Match the following:
| Column I | Column II | ||
| A. | Direct tax | (i) | Tax rate increases with tax base |
| B. | Indirect tax | (ii) | Tax rate remains constant |
| C. | Proportional tax | (iii) | Imposed on goods and services |
| D. | Progressive tax | (iv) | Impact and incidence lie on the same person |
Define Indirect tax
Explain how indirect taxes can be inflationary.
State two drawbacks of direct taxes.
Draw a neat labelled diagram for progressive taxation.
Differentiate between progressive and regressive taxes giving an example for each.
Explain how indirect taxes can be made progressive.
