state and economic development Flashcards
what is the fiscal policy?
fiscal policy is a policy under which the government uses its expenditure and revenue programs
to produce desirable effects on national income, production, and employment
all taxes are broadly grouped into 2 types of taxes
direct taxes and indirect taxes
what are direct taxes?
direct taxes are those taxes which are really paid by those on whom they are legally imposed on
what are indirect taxes?
indirect taxes refers to the tax which is imposed on one person but is paid partly or wholly by another
examples of direct tax
income tax and property tax
examples of indirect tax
import duty and GST
why is a direct tax called so
it is called a direct tax because it is payable directly by the person form whom it is collected and hence is not transferable to any other person
why is the indirect tax called so
it is called so because they are paid to the government by one person but their burden is bourne on another person and since this transaction is indirect it is called an indirect tax
the differences between direct and indirect taxes
DIRECT TAXES
–> tax is imposed on wealth and property of people
–> these taxes are linked to people and cannot be escaped from
INDIRECT TAXES
–> these taxes are imposed on goods and services which people consume
–> these taxes are linked to a particular transaction and hence can be avoided by not entering into the particular transaction
what is proportiional tax
all income is taxed at a uniform rate
proportional tax is the tax in which the rate of tax remains the same
what is progressive tax
a tax is said to be progressive when the rate of tax increases as the taxpayer’s income increases
what is regressive tax
a tax will be regressive when the rate of tax decreases as the tax base increases
what is degressive tax
under this system the rate of tax increases upto a certain limit but after that a uniform rate is charged
what is the result of degressive tax and where is it usually found
the result is that higher income groups have to scarifice less compatred to lower income groups and this type of taxation is usually found in income tax
