Which of the following statements are correct ? Ability to pay princ

Which of the following statements are correct ?

Ability to pay principle of taxation holds that the amount of taxes people pay should relate to their income or wealth
The Benefit Principle of taxation states that individuals should be taxed in proportion to the benefit they receive from Government programmes
A progressive tax takes a larger share of tax from poor families than it does from rich families
Indirect taxes have the advantage of being cheaper and easier to collect

Select the correct answer using the code given below:

1 and 3 only

2 and 4 only

1, 2 and 4 only

1, 2, 3 and 4

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CDS-1 – 2016

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Statement 1 is correct as the ability to pay principle suggests that individuals with higher income or wealth should contribute a larger proportion of taxes. Statement 2 is correct as the benefit principle proposes that individuals should pay taxes based on the government services they benefit from. Statement 4 is generally correct; indirect taxes like GST are often easier and cheaper to collect compared to assessing income tax for every individual or corporation. Statement 3 is incorrect; a progressive tax takes a larger share of tax from richer families than from poorer families. Therefore, statements 1, 2, and 4 are correct.

Understanding the basic principles and types of taxation (ability to pay, benefit principle, progressive, indirect taxes) is crucial.

A regressive tax takes a larger share from poor families, while a proportional tax takes the same percentage from all income levels. Indirect taxes (like GST, customs duty) are levied on goods and services, while direct taxes (like income tax, corporate tax) are levied on income and wealth.

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