The benefit principle of taxation suggests that a person should pay taxes mainly according to:
Correct answer: A. The public services received by that person
- A. The public services received by that person
- B. The number of dependants in that household
- C. The total currency held by the central bank
- D. The level of national exports
Explanation
Under the benefit principle, people contribute in relation to the benefits they obtain from government services. This differs from the ability-to-pay principle, which focuses on income or wealth.
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About Public Finance
Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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