Advantages of indirect taxes, Managerial Economics


a. They are less costly to administer because the producers and sellers themselves deposit them with the government.

b. If levied on goods with inelastic demand with respect to price rises, it will result in high revenue collection.

c. Indirect taxes reach the pockets of all income groups.  Thus, they have a wide coverage, and every consumer pays to the state exchequer according to his ability to pay.

d. They can check on the consumption of harmful goods like wine, cigarettes and other toxicants.

e. Can be used as a powerful tool for implementing economic policies by the government.  If the government wants to protect domestic industries from foreign competition, it can levy heavy import duties.  This will help to develop domestic industries.  If the government wants to encourage one industry on a priority basis, it may not levy any taxes on its products but continue the taxes imposed on other industries.  The government may do so in order to encourage, a particular technology or employment in a particular industry.

Posted Date: 11/30/2012 3:11:42 AM | Location : United States

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