Demerits of direct taxes, Managerial Economics

Demerits of direct taxes

a. Heavy direct taxation, especially when closely linked to current earnings, can act as a serious check to productivity by encouraging absenteeism and making men disinclined to work.

b. Heavy direct taxation will clearly reduce people's ability to save since it leaves them with less money to spend.  Taxation may, therefore, act as a deterrent to saving.  Heavy taxation of profits makes it more difficult for business to build up reserves to cover replacement of obsolete or worn-out capital and thus investment.

c. Direct taxes possess an element of arbitrariness in them.  They leave much to the discretion of the taxation authorities in fixing the rates and in interpreting them.

d. They are not imposed on all as incomes earned on subsistence and non legal activities are left out.

e. Cost of collection is generally high.

f. These taxes are easily evaded either by understating the source of income or by any other means.  Such taxes thus cultivate dishonesty and there is loss of revenue to the state.

Posted Date: 11/30/2012 3:10:13 AM | Location : United States







Related Discussions:- Demerits of direct taxes, Assignment Help, Ask Question on Demerits of direct taxes, Get Answer, Expert's Help, Demerits of direct taxes Discussions

Write discussion on Demerits of direct taxes
Your posts are moderated
Related Questions

1. A sporting goods company has hired a management consulting firm to analyze demand in 20 regional markets for one of its major products: a treadmill. The consultant uses data to

TERMS OF TRADE The relation between the prices of a country's exports and the prices of its imports, represented arithmetically by taking the export index as a percentage of t

PRINCIPLES OF AN OPTIMAL TAX  SYSTEM When taxes are imposed certain conditions must be fulfilled.  These conditions are known as Principles or canons of taxation. According to

Firm and industry supply schedules The plan or table of possible quantities that will be offered for sale at different prices by individual firms for a commodity is called su

1. The price of a CD (PC) is $10 and the price of a DVD (PD) is $20. Philip has his income (M) of $100 to spend on the two goods. Consider three consumption bundles: (C, D) = (2, 3

REASONS FOR FLUCTUATIONS IN AGRICULTURAL PRICES Production depends on factors beyond the control of the producers e.g. weather, disease and pests.  Actual and planned output i

Factor combination in the long run In the long run it is possible to vary all factors of production. The firm is therefore restricted in its activities by the law of diminish

discuss baumols dynamic models

Jeremy is an economics learner who loves hamburgers. He could eat any number of them for dinner, but he gets a really bad stomach ache after eating a certain amount. In fact, his u