The question asks for the correct definition of a tax. We need to evaluate each option against the fundamental characteristics of taxation as understood in public finance.
Correct Option: D) Compulsory and does not entail a direct quid pro quo (direct return of specific service) to the taxpayer
The question asks to identify the type of tax where the burden cannot be shifted to another person and is paid directly by the person on whom it is levied. This requires understanding the fundamental definitions of direct and indirect taxes.
Correct Option: C) Direct taxes
The question asks to identify the type of tax where the burden can be shifted from the person who initially pays it to another, typically the final consumer. This characteristic is a defining feature of a specific category of taxes.
Correct Option: B) Indirect taxes are taxes levied on goods and services, and their burden can be shifted from the person who initially pays the tax (e.g., manufacturer or seller) to another person (typically the final consumer) by including the tax in the price of the good or service. Examples include Goods and Services Tax (GST), customs duties, and excise duties.
The question asks to identify a tax system where the tax rate increases with taxable income, placing a higher burden on those with a greater ability to pay. We need to evaluate each option based on its definition in taxation.
C) Progressive tax system — This system is characterized by a tax rate that increases as the taxable income or base increases. This aligns with the principle of "ability to pay," where those with higher incomes contribute a larger proportion of their income in taxes.
The question asks to identify a tax system where the tax rate remains constant regardless of the income level. This requires understanding the definitions of different types of tax systems based on how the tax rate changes with income.
Correct Option: B) Proportional (flat) tax system
The question asks to identify a tax system where the effective tax rate decreases as income rises, thus placing a heavier relative burden on lower-income individuals. We need to understand the definitions of different tax systems to determine the correct answer.
B) Regressive tax system — In a regressive tax system, the tax rate applied decreases as the income of the taxpayer increases. This means that individuals with lower incomes end up paying a larger proportion of their income in taxes compared to those with higher incomes, thus placing a heavier relative burden on the poor.