Which of the following statements are correct ? 1. Ability to pay principle of taxation holds that the amount of taxes people pay should relate to their income or wealth 2. The Benefit Principle of taxation states that individuals should be taxed in propo

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Q: 117 (CDS-I/2016)

Which of the following statements are correct ?
1. Ability to pay principle of taxation holds that the amount of taxes people pay should relate to their income or wealth
2. The Benefit Principle of taxation states that individuals should be taxed in proportion to the benefit they receive from Government programmes
3. A progressive tax takes a larger share of tax from poor families than it does from rich families
4. Indirect taxes have the advantage of being cheaper and easier to collect
Select the correct answer using the code given below:

question_subject: 

Economics

question_exam: 

CDS-I

stats: 

0,58,28,15,8,59,4

keywords: 

{'taxation': [0, 0, 0, 3], 'benefit principle': [0, 0, 0, 2], 'indirect taxes': [0, 0, 1, 0], 'progressive tax': [0, 0, 0, 1], 'tax': [0, 0, 0, 1], 'taxation states': [0, 0, 0, 1], 'income': [0, 3, 0, 0], 'taxes people': [0, 0, 0, 1], 'principle': [0, 0, 0, 1], 'wealth': [0, 0, 0, 1], 'benefit': [1, 0, 2, 2], 'government programmes': [0, 0, 0, 1], 'advantage': [1, 0, 0, 5], 'rich families': [0, 0, 0, 1]}

Option 1 states that the ability to pay principle of taxation holds that the amount of taxes people pay should relate to their income or wealth. This means that individuals with higher incomes or greater wealth should pay a larger amount of taxes compared to those with lower incomes or less wealth. This statement is correct.

Option 2 states that the benefit principle of taxation states that individuals should be taxed in proportion to the benefit they receive from government programs. This means that individuals who benefit more from government programs should pay higher taxes. This statement is incorrect as the benefit principle does not determine taxes based on the benefits received.

Option 3 states that a progressive tax takes a larger share of tax from poor families than it does from rich families. This statement is correct. A progressive tax system is one where the tax rate increases as income increases. This results in higher-income individuals paying a higher proportion of their income in taxes.

Option 4 states that indirect taxes have the advantage of being cheaper and easier to collect. This statement is correct. Indirect taxes are imposed on goods and services, and they are usually collected at the point of sale. They are easier to administer and collect compared to direct taxes, which are levied on individuals` incomes.

Therefore, the correct statements are 1, 2

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