Question

As you are well aware, there are many different taxes imposed in the economy. Two major revenue sources for governments are income taxes and sales taxes. If you were charged with implementing a tax structure to raise revenue for public-sector expenditures, would your design be focused on taxation of income or taxation of sales? Please discuss the advantages and disadvantages of your proposal.

Answer 1

My design would always be based on taxation of sales. They include the following advantages and disadvantages

Advantages

1) The people are encouraged to work more and with that the productivity is increased

2) Exports can be promoted which contribute a major part to the GDP

3) History where countries like Canada made use of the no income taxes to earn a lot.

Disadvantages

1) Less investments are encouraged

2) Income inequality can be increased

3) Public distribution system may be affected.