Under the ability-to-pay approach, the fairness of taxation is judged mainly by a taxpayer's:
Correct answer: B. Capacity to bear the tax burden
- A. Use of a particular public service
- B. Capacity to bear the tax burden
- C. Distance from the tax office
- D. Frequency of government borrowing
Explanation
The ability-to-pay principle bases tax liability on economic capacity, commonly measured through income, wealth, or expenditure. The benefit principle instead links payment to the benefits received from public services.
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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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