Q8 of 11 Page 142

How would VAT reduce the evasion of taxes on goods?

A VAT is the Value Added Tax in which the tax is levied on every production process of a commodity. Any increase in the value in each stage of production it will be imposed by VAT. When the tax is levied in every stage of production, it becomes very difficult to evade the tax. Tax evasion is the illegal evasion of the tax by the individuals. When the tax is included in all the stages of the production, it will reduce the evasion of the tax by the individuals. But tax avoidance can be done in VAT by transferring the tax burden to another individual by increasing the price of the product which the consumer buys.


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6

A group of four friends decided to stay together by contributing money towards the rent of a house. The rent was Rs.2000 per month.

a. How could this be shared among them?


b. We also know that two of them earned Rs.3000 per month and the other two Rs.7000 per month. Is there some other way of sharing the cost so that each one of them feels the same pinch?


c. Which way of sharing would you prefer and why?

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Tax on income or tax on commodities. Which of the two affects the rich more and which affects the poor more? Explain with reasons.

 9

What is the difference between the Excise duty and Customs duty?

 10

Is there any hike in the bus fares recently? If so, try to know the reasons for it.