Merits of direct taxes, Managerial Economics

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Merits of direct taxes

a.  They satisfy the principle of equity as they are easily matched to the tax payers capacity to pay once assessed.

b.  They satisfy the principles of certainty and convenience to tax payers as they know the time and manner of payment, and the amount to be paid in the case of these taxes.  Similarly, the government is also certain as to the amount of money it shall receive from these taxes.

c. They satisfy the Canon Simplicity as they are easy to understand.

d. Because most of them are progressive, they tend to reduce income inequalities as the rich are taxed heavily through income tax, wealth tax, expenditure tax, excess profit, gift tax, etc. so long as they are alive; and through inheritance taxes or death duties when they die.  The poor and the income groups which are below the minimum tax limit are exempted form these taxes.  These taxes thus reduce income and wealth inequalities because of their progressive nature.

e. Because the public are paying taxes to the government, they take an interest in the activities of the state as to whether the public expenditure is incurred on public welfare or not.  Such civic consciousness puts a check on the wastage of the public expenditure in a democratic country.


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