-What is the main intention of a tax, and why are they unavoidable? -What is mea
ID: 1104919 • Letter: #
Question
-What is the main intention of a tax, and why are they unavoidable?
-What is meant for a tax to be “equitable”?
-What is meant for a tax to be“efficient”?
-Is it possible for policymakers to change the tax system that improves both equity and efficiency?
-In economics, what is the “incidence” of a tax?
-Suppose that a government imposes a tariff on the import of cheese, what is the purpose of the tariff? What the tariff’s purpose for the market for cheese? In a market, what’s the reason behind a tax incidence?
-What’s a corporate income tax, and why don’t corporations pay taxes?
-Who pays for payroll tax? What’s the tax incidence of payroll tax?
Explanation / Answer
a) Taxes are levied by the government due to the authority of imposing the tax being granted to it by the constitution. They are levied because they act as a source of income to the government which is responsible for running the economy and so it needs some source of finance. Taxes are compulsory payments and necessary for the development of the nation
b) Equitable taxation principle implies each person should pay taxes with the same tax rate
c) Efficienct taxation principle implies each person should be tax according to his / her ability and so those who are more able than others, should be higher taxes
d) No because there is a tradeoff between setting two obectives and their attainment. If everyone pays tax at the same rate, then those who are less efficient will also be paying the same tax which more abled people are paying which is not (Pareto) efficient
e) It is the burden of tax and this indicates on whom the tax is imposed and who is actually paying it.
f) Tariff is a restrictive trade practice that attempt to favour trade for domestic producers and raise the price for consumers. It tends to limit the amount of imports being entered in the nation
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