1. Direct & Indirect Direct & Indirect

2.  Tax …….means charge  “A tax is a compulsory payment from a person to the govt to defray the expenses incurred in the common interest of all without reference to special benefits conferred”

3.  The main purpose is revenue: taxes raise money to spend on roads, schools and hospitals, and on more.  indirect government functions like market regulation or justice systems.

4. What are Direct Taxes? informal sense  A direct tax is one paid directly to the government by the person on whom it is imposed.  Direct taxes include Income and Property taxes etc. Direct Taxes

5. Who pays direct taxes?  A direct tax is borne entirely by the entity that pays it.  It can not passed on to another entity.  Unlike taxes on consumer spending items.

6. Why impose direct taxes?  To raise tax revenue to support government activities.  It influences on foreign direct investment (FDI).  Its burden is not transfer to common people.

7. Argument against direct taxes?  Higher direct taxes have regressive effects on investment.  High rate of income tax reduce the real income of a person.  It influences on living standard of people.  Loss of economic welfare.

8. What are indirect Taxes? Indirect taxes are takes on  Supplier in the market which effect their cost of production and therefore effect market supply at each price.  Taxes on specific items on consumers spending. Indirect Taxes

9. Who pays indirect taxes?  The burden of all indirect taxes can be passed on by the producer to the consumer.  This depends on the price elasticity of demand and supply.

10. Why impose indirect taxes?  To raise tax revenue to fund government spending.  To change the level and pattern of demand for different goods and services.  Indirect taxes are flexible – easy to change.  Also hard to avoid.

11. Argument against indirect taxes?  Many indirect taxes have regressive effects on low- income consumers.  Higher indirect taxes can cause inflation.  Harmful for economic activities because of higher prices and reduced output.

12.  Equality or Equity  Certainty  Productivity  Simplicity  Elasticity  Diversity

13.  It should be balanced combination.  It should ensure maximum social advantage  It should be an efficient instrument for the reduction of economic inequalities  ……an effective instrument of economic growth  ……..socially advantageous

14.  Progressive,proportional,regressive,degressive tax  Merits and demerits of taxes  Difference between public and private finance