QS Study

Arguments for and Against Income Tax

An income tax is a government tax on the taxable profit earned by an individual or corporation. It is applied to both earned income (wages, salaries, and commission) and unearned income (dividends, interest, and rents). In short, it is a certain percentage of your income that you have to pay regularly to the government.

Arguments for income tax are discussed below –

  • It can be imposed on the basis of ability to pay. Thus justice can maintain.
  • Redistribution of income for social justice can be ensured.
  • As it is a direct tax it can be easily administered and cost of administration become low.
  • It ensures canon of certainty, thus budget estimates in this regard become a reality.
  • With a chance of rate quantum of revenue can be increased or decreased.
  • It can be used as an instrument of fiscal policy to control and direct economy in the desired direction.
  • It increases political consciousness.

Arguments against income tax are discussed below –

  • It is difficult to define income and some confusion always remains there.
  • In most of the cases, tax provisions are ambiguous and not simplified one. As a result, taxpayers face difficulties.
  • There are allegations about harassment of taxpayers by the tax administration.
  • Taxpayers in some cases remain hostile to the government as payment is direct from his income and pocket.
  • It gives rise to tax evasion and avoidance which are not compatible with the discharge of civil responsibility.
  • Maintenance of account and following rules becomes difficult which can give rise to the arbitrary decision of the tax officials.
  • If the tax becomes high, it can be discourage saving. Investment and production.