Should direct taxation be abolished?

[dimpy.handa]

Should direct taxation be abolished?

The poorer sections of society currently believe themselves disproportionately burdened by taxes, in comparison to the rich, who are stigmatised as living off those worse off than themselves. Whether this has any basis in fact, the governments needs to act to make taxes seem fairer.

 

[dimpy.handa]

Direct taxes are transparent taxes, which means that the person paying the tax knows exactly how much is taken and to which specific agency it goes. This makes the taxing agency more accountable to the people whom it taxes, since the taxpayer doesn't have to follow a trail through any third parties. In addition, it allows the taxpayer to address discrepancies more readily, since he can spot them via his own records and point them out to the collecting agency.

Direct taxes tend to be more progressive, in that the amounts are scaled to reflect a person's income. Someone working at the poverty level, for example, pays a smaller percentage of his income in taxes than a millionaire. Indirect taxes such as sales taxes charge everyone the same amount, which eats up a greater percentage of a poor person's income than a rich person's income. This is especially true in the case of essentials such as groceries or gasoline, which everybody needs to function in society.

 

[swatiraohnlu]

Indirect taxation is perhaps even easier to avoid, due to smuggling, unlicensed trading, car boot sales and so on. For example, it was estimated that half the cigarettes sold in Britain were done so illicitly. Indirect taxation would be both disastrous for revenues and far harder to trace than income tax evasion.