Question

State the four merits of a direct tax.

Explain in brief two merits of a direct tax. 

State two merits of direct taxes.

Briefly explain any two merits of direct taxes.

Mention three merits of direct taxes.

Give two merits of direct taxes.

State any two merits of direct taxes.

Mention two merits of direct taxes.

Explain briefly three merits of a direct tax.

Answer 1

The following are the merits of direct taxes:

1. Economy: Direct taxes are economical in the sense that the cost of collection of these taxes is relatively low, because the same officers who assess small incomes or properties can also assess large incomes or properties. Moreover, the taxpayers make the payment of these taxes directly to the government.
2. Equity: Direct taxes are based on the principle of ability to pay (or principle of progression). So the burden of a direct tax is equitably distributed on different people and institutions. They fall more heavily on the rich than on the poor.
3. Certainty: Direct taxes are certain. The taxpayer knows how much tax is due from him and when, and so he can adjust his income and expenditure. The government also knows fairly well the amount of revenues coming to it by way of direct taxes and can adjust its income and expenditure.
4. Elasticity: Another merit of direct taxes is that they are based on the canon of elasticity. These taxes are elastic in nature, as the government revenue can be increased by raising the tax rates in times of crisis. Moreover, the yield from direct taxes goes up automatically with an increase in the income of the people.