Taxation

Question 1

What is a direct tax

Answer 1

A direct tax is a tax that cannot be passed onto another tax payer

Question 2

Examples of direct taxation

Answer 2

Income tax
Cooperation tax

Question 3

Pros of direct taxation

Answer 3

Can be anti inflationary
Reduce income inequality(progressive)
Increase certainty for economic agents

Question 4

Cons of direct taxation

Answer 4

High rates may hinder investment and econ growth

Laffer curve theory

Question 5

Indirect taxation

Answer 5

A tax levied on goods and services consumer before they reach the consumer which they payb

Question 6

Examples of indirect taxation

Answer 6

VAT
tax on cigarettes and alcohol
Import taxes

Question 7

Pros of indirect taxation

Answer 7

Taxpayers don’t feel burden as much

Consistent revenue as it can be placed on inelastic goods

Question 8

Cons of indirect taxation

Answer 8

Inflation due to higher cost to produce increasing price level
Regressive nature %paid is higher on lower income households
Can encourage black markets