Benefit-received principle of taxation: Identify what the tax burden is based on under this principle. Context: In public finance, alternative principles include ability-to-pay vs. benefit-received rules. Choose the correct basis for taxation under the benefit-received principle.
General Knowledge
Indian Economy
Difficulty: Easy
Choose an option
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AThe benefits a taxpayer receives from public goods and services
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BThe taxpayer's ability to pay measured by income or wealth
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CThe deadweight loss minimized by the chosen tax
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DThe political feasibility of raising a given amount of revenue
Answer
Correct Answer: The benefits a taxpayer receives from public goods and services
Explanation
Given data
- Principle: Benefit-received.
- Task: State what determines each taxpayer's contribution.
Concept / Approach Under the benefit-received principle, individuals should pay taxes in proportion to the benefits they derive from public expenditures.
Reasoning Unlike the ability-to-pay principle (income/wealth based), the benefit-received rule ties tax shares to usage or derived benefits from public goods/services.
Final Answer The benefits a taxpayer receives from public goods and services.