Title: Proportional Versus Progressive Taxation - Systems of Taxation - Proportional Principle of Tax - Progressive Principle of Tax - Definition and Explanation - Economicsconcepts.com
Headings: Proportional Versus Progressive Taxation:
Proportional Versus Progressive Taxation:
Systems of Taxation:
(1) Proportional Principle of Tax:
Definition and Explanation of Proportional Principle of Tax:
(2) Progressive Principle of Tax:
Definition and Explanation of Progressive Principle of Tax:
Arguments in Favor of Progressive Taxation:
Arguments Against Progressive Taxation:
Relevant Articles:

Content: The principle of progressive taxation which is the most popular and plausible theory of justice in taxation has not escaped criticism. The main objections leveled against this principle are as under: (i) In order to secure justice in taxation, it is very difficult to formulate a rational scheme of progression. The finance minister settles the degree of progression arbitrarily. As the rates of taxes are fixed on purely personal valuation, therefore, they may not lead to equal sacrifice. In the words of J.S. Mill: " A graduated income tax is an entirely unjust mode of taxation and in fact of a graduated robbery". (ii) Another objection leveled against this theory is that if the rate of progression is very high, it will discourage saving, impede the accumulation of capital and thus hamper the economic development of the country. (iii) It is also pointed out that a very steep progression encourages evasion of I taxes. When people come to know that with the rise in their incomes, they will be taxed at steep rates, they may try to conceal their incomes by showing false statements.