One disadvantages of direct taxes is that they
ECONOMICS
WAEC 2010
One disadvantages of direct taxes is that they
- A. allocate scarce resources
- B. are not rigid
- C. can be progressive
- D. can be evaded
Correct Answer: D. can be evaded
Explanation
Direct taxes are are taxes such as income tax, which is levied on the income or profits of the person who pays it, rather than on goods or services. One disadvantage of this type of tax is that payers can evade payment.
Tax evasion is an illegal activity in which a person or a corporation deliberately avoids paying a true tax or under-pays taxes. Some income earners or companies may deliberately refuse to pay taxes, or reduce their taxable income/inflow to smaller amounts in other to pay lesser taxes. This has been a serious problem of direct taxes
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