Which of the following statements are correct 1 Ability to pay principle of taxation holds tha...........

Economic Affairs Tax System

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 Bene?t Principle of taxation states that individuals should be taxed in proportion to the bene?t 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:

1 and 3 only

2 and 4 only

1, 2 and 4 only

l, 2, 3 and 4

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Explanation:

3rd statement is incorrect i.e. A progressive tax takes a larger share of tax from poor families than it does from rich families.

A progressive tax is a tax in which the tax rate increases as the taxable amount increases. The term "progressive" refers to the way the tax rate progresses from low to high, with the result that a taxpayer's average tax rate is less than the person's marginal tax rate.