Talk about the drawbacks of utilizing GDP to gauge a nation’s level of prosperity.
Direct tax is a type of tax where the incidence and impact of taxation fall on the same entity. In the case of direct tax, the burden cannot be shifted by the taxpayer to someone else. Income tax, corporation tax, property tax, inheritance tax and gift tax are examples of direct tax. Indirect tax isRead more
Direct tax is a type of tax where the incidence and impact of taxation fall on the same entity. In the case of direct tax, the burden cannot be shifted by the taxpayer to someone else. Income tax, corporation tax, property tax, inheritance tax and gift tax are examples of direct tax. Indirect tax is a levy where the incidence and impact of taxation do not fall on the same entity. The burden of tax can be shifted by the taxpayer to someone else. It is usually imposed on a manufacturer or supplier who then passes on the tax to the consumer. It is imposed on a product or service. Indirect tax has the effect of raising prices of products on which they are imposed. Goods and Services Tax (GST), customs duty etc. are examples of indirect taxes. Direct taxes are considered progressive because the government can impose a lower tax rate on low-income earners compared to those with a higher income. That means in direct taxes, it is possible to impose higher taxation rates for the rich and lower tax rate for the poor. It reduces the tax burden on people who can least afford to pay them and takes a larger percentage from high- income earners. For example, personal income tax in India has a higher tax rate for higher income slab. Indirect taxes are considered regressive in nature as they are applied uniformly to all taxpayers, regardless of their income level. For example, same rate of taxation is applied in case of GST, an indirect tax, on the same amount of goods or services purchased. If two individuals buy the same amount (say a packet of biscuits), both have to pay the same amount of tax. The GST, in effect, constitutes a higher percentage of the lower-earning individual’s wages and a lower percentage of the higher-earning individual’s wages. In this way, direct taxes facilitate higher burden of taxes on the rich acting as a tool of redistributive justice while indirect taxes affect the poor more. Therefore, increasing the indirect taxes is considered as a regressive step while imposing direct taxes as per income level of the taxpayer is considered as progressive tax.
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Gros Domestic Product (GDP) is the sum total of value of goods and services created within the geographical boundary of a country in a particular year. It is usually taken as an indicator of the well-being in the context of per capita income suggesting the prosperity of the people. It may indicate mRead more
Gros Domestic Product (GDP) is the sum total of value of goods and services created within the geographical boundary of a country in a particular year. It is usually taken as an indicator of the well-being in the context of per capita income suggesting the prosperity of the people. It may indicate more income and capacity to buy more goods and services among the people. However, there are some limitations of using GDP as an indicator of economic welfare of a country:
In addition to this, GDP also does not take into account economic inequality, loss of jobs and opportunities and level of health and education and quality of choices in an economy. Therefore, new concepts like Gross National Happiness (GNH), Human Development Index (HDI) and the Social Progress Index (SPI) are often discussed as the better alternative to assess the well-being of society.
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