Merits of indirect tax

Business studies study module
  1. Can be used selectively; It can be used selectively to achieve a given objective e.g. consumption of some commodities.
  2. Tax payment is voluntary; indirect tax is only paid those who consume the tax commodities therefore those who do not want to pay the tax would only need to avoid taxed commodities.
  3. Difficult to evade; the tax cannot be evaded because it is part of the price of the commodity. All those who buy the commodity taxed must therefore pay the tax.
  4. Wide coverage/broad based; the tax is levied on a wide range of essential commodities thus a high amount of revenue is collected.
  5. Stimulate effort; indirect taxes if increased increases the prices of goods and services. People who want to maintain the same living standards will therefore have to work harder to be able to buy/affect the same goods and services.
  6. Convenient; the tax is paid in bits as one buys the goods and services. The tax is also hidden in the price of the commodity and the payer may not be aware of it.
  7. Flexible; flexible; the government can raise or reduce the tax rate to suit the prevailing economic situation in a country.



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