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Indirect Taxes Are Regressive in Nature. How Can They Be Made Progressive? - Economics

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Short Note

Indirect taxes are regressive in nature. How can they be made progressive?

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Solution 1

Poor people earn a lower income than the rich people but both have to pay indirect taxes. Thus the proportion of the tax burden is more on poor people than the rich for taxes. Hence, indirect taxes are regressive in nature. If indirect taxes are can be imposed on those goods and services which are consumed by mostly by the rich such as luxury items rather than items of necessary consumption, then indirect taxes can be made progressive.

Solution 2

Indirect taxes or taxes on necessaries are regressive in nature because they take away a larger proportion of lower-income as compared to higher income. Therefore, regressive taxes are unjust in nature. They can be made progressive by reducing the rate of indirect taxes on necessary items like food, clothes, shelter, etc.

Concept: Concept for Taxes and Types
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