TAX & its Basics:
Tax is a compulsory levy imposed on economic units by the government. Taxes are generally divided into direct taxes and indirect taxes. Direct taxes are those which are levied directly on the entity meant to bear the burden. Indirect Taxes are those taxes in which tax burden is shifted from where they are initially imposed. In India, Personal Income Tax and Corporate Income Tax are the important direct tax levied by the central government .online tutoring has proved beneficial for Students who want to excel their career in the economics field. Online assignment help is one of the means by which student can get an in-depth knowledge regarding basics of economics .So every student should opt for economics online assignment help for this purpose. This will help them to improve their knowledge regarding the subject and will prove a strong foundation.
TAX & ITS CHARACTERISTICS:
A good tax system should possess the following characteristics:
Revenue Adequacy Governments levy taxes to finance their expenditures.
Therefore, a good tax system should generate adequate revenue for the
Equity The tax burden should be distributed in an equitable manner.
Efficiency The tax system should not interfere with the efficient allocation of
Administrative Simplicity The tax structure should be simple to administer.
Also the cost of collection should be the minimum. Simplicity of the tax structure.Would also help in checking evasion.
Transparency The levying of taxes and the spending of tax proceeds should
be done in a transparent manner. The tax structure should be such that its
Incidence should be clear.
A Pareto efficient allocation of resources is defined as one from which no economic Agent can be made better off, without making someone else in the economy worse off. Mainstream economic theory teaches us that in a system where each economic Agent maximizes its objective function subject to the constraints (e.g. individuals Maximize their utility subject to their budget constraint and firms maximize their profits) and given certain other assumptions, free operation of market forces would lead to
a Pareto efficient allocation. Imposition of a tax in such a system would alter the relative prices. The price signals would be distorted, thus affecting the choice of the economic agents and altering the Allocation of resources. For example, with the imposition of sales tax, the slope of the consumers budget line changes and his equilibrium position is changed. The Economic agent would try to minimize the payment of the tax by reducing the Consumption of the commodity which is taxed. Therefore, the weights of different Commodities in the consumers consumption basket are changed. In the case of an indirect tax, the distortionary effect is clear.