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State five advantages and five disadvantages of indirect taxes.

State five advantages and five disadvantages of indirect taxes.

Answers

Simon
Advantages.
• They satisfy the canon of diversity in such that they can be levied on a variety of commodities and services.
• They are less inconviient and less burdensome.
• They have a wide coverage because they can reach the pockets of all income groups.
• They are elastic in nature such that the government can reduce or increase the rates of tax.
• There is less possibility of evasion because they are included in commodity price.
• They are economical in that they involve little cost of collection because the producers and the sellers themselves deposit them with the government.
• They can be used to reduce the consumption of harmful goods.


Diasvantages
• The revenue from indirect taxes is uncertain because it is not possible to accurately estimate the effect of such taxes on the demand for products.
• Indirect taxes do not create civic consciousness among major taxpayes because a person who buys a commodity does not know that he is paying tax to the government.
• They are uneconomical because their cost of collection is heavy.
• They do not satisfy the canon of equity because the rich and the poor buy commodities at the same price.
• When the price of a commodity increases with the levy of a tax, its demand falls. As a result its production falls and so does the employment.
skilled writter answered the question on May 3, 2018 at 17:30

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