Question

Merits of direct taxes – explain.

Answer 1

1. Equity: Indirect taxes, the rate of tax varies according to the tax base.
   Eg: income tax.
2. Certainty: It can be ensured by direct taxes Eg: income taxpayers know when and what rate he has to pay income tax?
3. Elasticity: Direct taxes also satisfy the canon of elasticity. Income tax is income elastic in nature. As income level increases, the tax revenue to the Government also increases automatically.
4. Economy: The cost collection of direct taxes is relatively low. The taxpayers pay the tax directly to the state.