It is easy to collect less costly interms of logistics. 2) Difficult to evade The tax forms part of the selling price for goods hence it is not possible to evade 3) Wide coverage Unlike direct taxes, indirect taxes have a wide coverage .majority of consumable goods and services are subject to indirect taxes. 4. Elastic Some of the indirect taxes are elastic in nature. When government feels it necessary to increase its revenues, it increases these taxes. In times of prosperity indirect taxes produce huge revenues to the government. 5. Universality Indirect taxes are paid by all classes of people and so they are broad based. Poor people may be out of the net of the income tax, but they pay indirect taxes while buying goods.
6. Influence on Pattern of Production By imposing taxes on certain commodities or sectors, the government can achieve better allocation of resources. For e.g. By Imposing taxes on luxury goods and making them more expensive, government can divert resources from these sectors to sector producing necessary goods. 7. May not affect motivation to work and save The indirect taxes may not affect the motivation to work and to save. Since, most of the indirect taxes are not progressive in nature, individuals may not mind to pay them. In other words, indirect taxes are generally regressive in nature. Therefore, individuals would not be demotivated to work and to save, which may increase investment. 8. Social Welfare The indirect taxes promote social welfare. The amount collected by way of taxes is utilized by the government for social welfare activities, including education, health and family welfare. Secondly, very high taxes are imposed on the consumption of harmful products such as alcoholic products, tobacco products, and such other products. So it is not
You've reached the end of your free preview.
Want to read all 5 pages?
- Summer '15
- indirect taxes