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What are the merits of indirect taxes?

Category : Public Economics | Answer: 1 4 Months Ago

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Some merits of indirect taxes are :-

  • Convinient to pay and less cumbersome - taxpayers do not feel pinch of indirect tax as in the case of direct taxes. They are also easy to collect as they are collected from firms and traders who pass it on to the buyers.
  • Large revenue potential - through it even the poor and low income people can be brought into the tax net. These taxes are especially beneficial for finances of developing countries as they typically have low direct taxes base.
  • Has great tax buyancy - that is they increase fastly as national income(GDP) increases. As GDP increase production of goods and services increase and so thus the indirect tax collected from these resources.
  • Important instrument for influencing pattern of production and investment - for example high tax on production and consumption of alcohol, tobacco etc. curb their production as well as consumption. High tax on luxury goods and low tax on essential goods lead to lowering of conspicouus consumption in the economy.

 

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