A) It fetches more revenue
B) It can be more easily collected
C) It allows for taxation according to means
D) It has greater tax compliance
Correct Answer: C
Solution :[c] Direct tax is one that is imposed on the income and property of a person. Thus, income tax, corporation tax, property tax, capital gains tax etc. are all the direct taxes-The following are the merits of direct taxes: 1. Direct taxes are very economical in the sense that the cost of collecting these taxes are relatively less as they are usually collected at the source and they are paid to the government directly. 2. Direct taxes satisfy the canon of certainty. The tax payers know that how much they have to pay and on what basis they have to pay. The government also knows fairly the amount of tax it is going to collect. 3. Direct taxes can be made to conform to the principle of ability to pay by choosing the most appropriate rate schedules. By making the rate structure possible and progressive their burden can be put more on rich than poor. 4. Direct taxes are progressive in nature. Rich people are subjected to higher taxes on the basis of their higher income and hence reduces the inequalities of income and wealth. 5. When one knows that his taxes shall be well utilized for the benefit of the public such as the developmental and defense projects, infrastructural development establishment of government schools, hospitals, maternity homes etc., they take active part in the process of payment of taxes. They pay their dues on time and pay it will honesty. On the other hand, the in direct taxes go in the hands of the traders and the citizens do not have any account whatsoever in the utilization of these taxes. Hence, it acts and disincentive for them.
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