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Questions
Explain the term Incidence of a tax.
What is meant by incidence of taxation?
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Solution
Incidence means the final resting place of a tax. The incidence is on the person who ultimately bears the money burden of the tax.
RELATED QUESTIONS
Which of the following is an advantage of direct taxes?
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 |
Which of these taxes is most likely to be progressive?
The tax whose rate remains unchanged irrespective of the income of the taxpayer is called as ______.
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 |
Give two reasons why the government imposes tax?
Which one is better progressive or regressive taxation and why?
An indirect tax can be made progressive by imposing higher tax rates on luxuries. Justify the above statement.
State two differences between income tax and commodity tax.
Explain the significance of taxes.
