Essay On Direct Taxes
DIRECT TAXES
MERITS
They are equitable
It is based on a person’s ability to pay so the allocating of the tax burden is just. There is horizontal equity where people are being taxed are in the same economic state so taxation is at the same rate. Vertical equity is where there is discrimination in tax payment according to different economic states people are in.
They are productive
When the national income changes the revenue that comes from direct taxes tends to decrease or increase .
There is certainty.
Direct taxes tend to be exact in determining the country’s revenue. Direct taxes enable the person paying the tax to know exactly how much he or she is to pay.
They are economic
The direct taxes tend to be collected yearly in big sums hence the cost of
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If there the purchasing power tends to be excessive during inflation, it is curbed through increasing of taxes.
They are progressive
Direct taxes help reduce the gap that there is in the inequalities of people’s income. It therefore helps bring social equality.
DEMERITS OF DIRECT TAXES
Encourages tax evasion
Direct taxes make a person to evade paying tax because of high tax rates and poor tax administration. Tax payers evade taxes by manipulating accounts to give incorrect information about their incomes
It causes inconvenience
Direct taxes tend to be inconvenient as they involve some procedures in the filing in of the returns. Payment of direct taxes is painful to tax payers as they give some of their income as tax
They are not imposed on all
The tax imposition is imbalanced sectors such as the corporate sector tend s to be taxed heavily whereas sectors such as the agricultural sector is free of taxes
They are arbitrary
Direct taxes have no basis on which they are determined. If they are progressive, their rates have to be fixed in an arbitrary manner and if they are proportional, the burden is heavy mostly on the
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