Question

The following is NOT a cost of taxation over and above the tax liability itself:

A. horizontal equity

B. deadweight loss

C. excess burden

D. compliance cost

Answer 1

A. Horizontal equity is not a Cost of taxation over and above tax liability itself.

This is used to ensure fairness in the payment of tax. As per this people have to pay same tax if their income are same. That means people of same income should be treated as same by charging or imposing same level tax. This principle provides protection to the individuals against arbitrary discrimination.

All the 3 other options are cost of taxation over and above tax liability itself. Dead weight loss is the loss due to tax it is also known as excess burden. Compliance cost are the tax incurred by tax payers as a result of meeting the tax legislation or costs incurred by paying taxes regularly and accurately.