Explain five merits of direct taxes to the government.

Explain five merits of direct taxes to the government.

Merits of direct taxes to the government include:

1. Economical to collect - it provides higher revenue at lower costs of administration since collection is executed at the source e.g. PAYE.
2. Certainty - the government knows the amount of tax, the manner and time of payment, hence budget and plan for it. It is also difficult to evade.
3.  Convenience - it is collected from the source at regular intervals making it easy and very convenient.
4.  Price stability - it is a useful tool for maintaining stable prices by affecting disposable income and consequently influencing aggregate demand.
5. Equity - the progressive nature of direct taxes distributes tax burden equitably, thus the government is able to redistribute wealth by heavily taxing those who earn more as opposed to those earning little.
6. Simple to determine - Every wage level falls into predictable tax brackets.
7.  Easy to administer - it is very difficult to evade hence very easy to administer as the collection points are also fewer as opposed to collecting tax directly from individuals.
8. It is elastic - it expands with increased income and population.

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