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Tamilnadu Samacheer Kalvi 10th Social Science Economics Solutions Chapter 4 Government and Taxes
Government and Taxes Textual Exercise
I. Choose the correct answer.
Question 1.
The three levels of governments in India are ………………
(a) Union, state and local
(b) Central, state and village
(c) Union, municipality and panchayat
(d) None of the above
Answer:
(a) Union, state and local
Question 2.
In India, taxes are including:
(a) Direct taxes
(b) Indirect taxes.
(c) Both (a) and (b)
(d) None of these
Answer:
(c) Both (a) and (b)
Question 3.
Which is the role of government and development policies?
(a) Defence
(b) Foreign policy
(c) Regulate the economy
(d) all of above
Answer:
(d) all of above
Question 4.
The most common and important tax levied on an individual in India is:
(a) Service tax
(b) Excise duty.
(c) Income tax
(d) Central sales tax
Answer:
(c) Income tax
Question 5.
Under which tax one nation, one uniform tax is ensured ……………
(a) Value added tax (VAT)
(b) Income tax
(c) Goods and service tax
(d) Sales tax
Answer:
(c) Goods and service tax
Question 6.
Income tax was introduced in India for the first time in the year:
(a) 1860
(b) 1870
(c) 1880
(d) 1850
Answer:
(a) 1860
Question 7.
………………. tax is charged on the benefits derived from property ownership.
(a) Income tax
(b) Wealth tax
(c) Corporate tax
(d) Excise duty
Answer:
(b) Wealth tax
Question 8.
What are identified as causes of black money?
(a) Shortage of goods
(b) High tax rate
(c) Smuggling
(d) All of above
Answer:
(d) All of above
Question 9.
Tax evasion is the illegal evasion of taxes by …………..
(a) Individuals
(b) Corporations
(c) Trusts
(d) All of the above
Answer:
(d) All of the above
Question 10.
Payments are:
(a) Fees and fines
(b) Penalities and forfeitures
(c) None of the above
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)
II. Fill in the blanks.
1. …………… is levied by the government for the development of the state’s economy.
2. The origin of the word ‘tax’ is from the word ……………
3. The burden of the ……………… tax cannot be shifted to others.
4. ………….. tax is levied on companies that exist as separate entities from their shareholders.
5. The Goods and Service Tax act came into effect on ………………
6. The unaccounted money that is concealed from the tax administrator is called …………….
Answers:
1. Tax
2. Taxation
3. Direct
4. Corporate
5.1 July 2017
6. Black money
III. Which of the following statement is correct about GST?
Question 1.
(i) GST is the ‘one-point tax’.
(ii) This aims to replace all direct taxes levied on goods and services by the Central and State governments.
(iii) It will be implemented from 1 July 2017 throughout the country.
(iv) It will unified the tax structure in India.
(a) i and ii are correct
(b) ii, iii and iv are correct
(c) i, iii and iv are correct
(d) All are correct
Answer:
(c) i, iii and iv are correct
Question 2.
Choose the incorrect statements.
(i) Shortage of goods, whether natural or artificial, is the root cause of black money.
(ii) Industrial sector has been the major contributor to black money.
(iii) Smuggling is one of the major sources of black money.
(iv) When the tax rate is low, more black money is generated.
(a) i and ii
(b) iv
(c) i
(d) ii and iii
Answer:
(b) iv
IV. Match the following.
Answer:
1. (d)
2. (e)
3. (a)
4. (b)
5. (c)
V. Give Short Answers.
Question 1.
Define tax.
Answer:
According to Prof. Seligman, “A tax is a compulsory contribution from a person to the Government to defray the expenses incurred in the common interest of all, without reference to special benefits conferred”.
Question 2.
Why we pay tax to the government?
Answer:
The levying of taxes aims to raise revenue to fund governance or to alter prices in order to affect demand. States and their functional equivalents throughout history have used money provided by taxation to carry out many functions. Some of these include expenditures on economic infrastructure (transportation, sanitation, public safety, education, healthcare our systems, to name a few), military, scientific research, culture and the arts, public works and public insurance and the operation of government itself. A government’s ability to raise taxes is called its fiscal capacity.
Question 3.
Write the canons of tax system?
Answer:
Canon of equity, Canon of certainty, canons of Economy and Convenience, Canon of Productivity and Canon of Elasticity.
Question 4.
What are the types of tax? Give examples.
Answer:
(i) J.S. Mill defines a direct tax as “one which is demanded from the very persons who it is intended or desired should pay it.” Some direct taxes are income tax, wealth tax and corporation tax.
(ii) If the burden of the tax can be shifted to others, it is an indirect tax. The impact is on one person while the incidence is on the another person. Therefore, in the case of indirect taxes, the tax payer is not the tax bearer. Some indirect taxes are stamp duty, entertainment tax, excise duty and goods and service tax (GST).
Question 5.
Write short note on Goods and Service Tax.
Answer:
The Goods and services taxes is one of the indirect taxes levied when a consumer buys a good or service. The tax came into effect on 1 July 2017. ’ The motto is one nation, one market, one tax.
Question 6.
What is progressive tax?
Answer:
Progressive tax rate is one in which the rate of taxation increases (multiplier) as the tax base increases (multiplicand). The amount of tax payable is calculated by multiplying the tax base with the tax rate. In the case of a progressive tax, the multiplicand (income) increases. When income increases, the tax rate also increases. This is known as a progressive tax.
Question 7.
What is meant by black money?
Answer:
Black money is unaccounted money. It is the income on which taxes have not been paid. In other words, the unaccounted money that is concealed from the tax administrator is called black money.
Question 8.
What is tax evasion?
Answer:
Tax evasion is the illegal evasion of taxes by individuals, corporations and trusts. Tax evasion often entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts actually earned, or overstating deductions.
Question 9.
Write some causes of tax evasion.
Answer:
- Hight rate of taxes.
- Low educational level of population.
- Complicated procedures of tax payments.
- Lack of citizen’s tax integrity.
Question 10.
What is the difference between tax and payments?
Answer:
| S. No. | Tax | Payments |
| 1 | Tax is compulsory to the government without getting any direct benefits. | Fee is the payment for getting any service. |
| 2 | If the element of revenue for general purpose of the state predominates, the levy becomes a tax. | While a fee is a payment for a specific benefit privilege although the special to the primary purpose of regulation in public interest. |
| 3 | Tax is a compulsory payment. | Fee is a voluntary payment. |
| 4 | If tax is imposed on a person, he has to pay it; otherwise he has to be penalised. | On the other hand fee is not paid if the person do not want to get the service. |
| 5 | In this case, tax payer does not expect any direct benefit.
Example: Income tax, gift box, wealth tax, VAT etc. |
Fee payer can get direct benefit for paying fee.
Examples: stamp fee, driving license fee, government registration fee |
VI. Brief Answer
Question 1.
Briefly explain the role of government in development policies.
Answer:
The role of government and development policies:
In India, the three levels of governments, namely, union, state and local, have been carrying out various functions for the benefit of people and society at large. These roles are into divided into seven categories for easy understanding.
Defence: This is an essential security function to protect our nation from our enemies. We know that we have three services, namely, army, navy and air force. The Union government is responsible for creating and maintaining defence forces.
Foreign Policy: In today’s world, we need to maintain friendly relationships with all the other countries in the world. India is committed to world peace. We should also maintain cordial economic relationships through exports and imports, sending and receiving investments and labour. This service is also provided by the Union government.
Conduct of periodic elections: India is a democratic country. We elect our representatives to Parliament and state assemblies. The Union government creates laws and administrative system and conducts elections to these two legislature institutions. Similarly the state governments conduct elections to local bodies within the state.
Law and order: Both the Union and state governments enact numerous laws to protect our rights, properties and to regulate our economy and society. To settle disputes, the Union government has a vibrant judicial system consisting of courts at the national, state and lower levels and state governments take the responsibility for administering the police force in respective states.
Public administration and provision of public goods: The government generally administers the economy and society through various departments, for example, revenue department, schools, hospitals, rural development and urban development. The list of departments with the Union and state governments are available in the public domain. The local governments provide public goods like local roads, drainage, drinking water and waste collection and disposal.
Redistribution of income and poverty alleviation: Governments collect various taxes to finance the various activities mentioned earlier. The taxes are collected in a way that the high-income people can bring in more tax revenue to the government than the poor. The governments also spend money such that the poor are given some basic necessities of life like food, shelter, clothing education, health care and monthly income to the very poor persons. Thus collecting taxes and spending for the poor is how the government redistributes income and introduces measures to reduce poverty.
Regulate the economy: The Union government, through the Reserve Bank of India, controls money supply and controls the interest rate, inflation and foreign exchange rate. The main objective is to remove too much of fluctuation in these rates. The Union also controls the economy through various other agencies such as Securities Exchange Board of India and Competition Commission of India. All the governments in India run public sector enterprises to provide important goods and services at affordable rates to the people.
Question 2.
Explain some direct and indirect taxes.
Answer:
Taxes are compulsory payments to Government by the people without expecting anything in return. Taxes are of two types: Direct taxes and Indirect taxes. .
Direct Taxes: A tax imposed on an individual or organisation which is paid directly is called as Direct taxes.
Some of the Direct taxes are explained below:
Income Tax:
- It is charged directly based on the income of a person.
- The rate at which it is charged varies depending on the level of income.
Corporate Tax:
- It is charged on companies that exist as separate entities from their shareholders.
- It is charged on interest gains from sale of capital assets located in India.
- It is also charged for fees for a technical services and dividends.
Wealth Tax:
- It is charged on the benefits derived from property ownership, on its current market value. .
Indirect Taxes:
Stamp Duty:
- It is a tax that is paid on official documents like marriage registration or documents related to a property in contractual agreements.
Entertainment Tax:
- It is a tax that is charged by the Government on any source of entertainment provided. Eg: Amusement Parks, Movie tickets, Exhibitions.
Excise Duty:
- It is levied on the goods at the time of its manufacture.
- In addition to sales tax, this tax is imposed.
Goods and services Tax:
- It is levied when a consumer buys a goods or services.
- GST varies with the nature of the goods.
Question 3.
Write the structure of GST.
Answer:
Structure of Goods and Service Tax (GST):
State Goods and Service Tax (SGST): Intra state (within the state) VAT/sales tax, purchase tax, entertainment tax, luxury tax, lottery tax and state surcharge and cesses.
Central Goods and Service Tax (CGST): Intra state (within the state) Central Excise Duty , service tax, countervailing duty, additional duty of customs, surcharge, education and secondary/higher secondary cess
Integrated Goods and Service Tax (IGST): Inter state (integrated GST) There are four major GST rates: 5%, 12%, 18% and 28%. Almost all the necessities of life like vegetables and food grains are exempted from this tax.
Question 4.
What is black money? Write the causes of black money.
Answer:
Black money is funds earned in the black market on which income and other taxes have not been paid.
Cause of Black money:
- Shortage of goods: Even if it is shortage occurring naturally or created artificially, it is the root cause of black money.
- Licensing proceeding: Permit, quota, license all these are associated with maldistribution of commodities in short supply which results in black money.
- Contribution of the Industrial sector: For example the controller of public limited companies tries to buy commodities at lower prices and bill them at high amount and the balance goes to them personally.
- Smuggling: Precious metals like gold and silver, electronic goods, textiles were levied heavy excise duty. To avoid paying these duties, smuggling is done illegally that results in black money.
- Tax structure: When tax rates are high, tax evasion naturally arises that leads to generation of black money.
Question 5.
Explain the role of taxation in economic development.
Answer:
The role of taxation in developing economics is as follows.
Resource mobilisation: Taxation enables the government to mobilise a substantial amount of revenue. The tax revenue is generated by imposing direct taxes such as personal income tax and corporate tax and indirect taxes such as customs duty, excise duty, etc.
Reduction in equalities of income: Taxation follows the principle of equity. The direct taxes are progressive in nature. Also certain indirect taxes, such as taxes on luxury goods, is also progressive in nature.
Social welfare: Taxation generates social welfare. Social welfare is generated due to higher taxes on certain undesirable products like alcoholic products.
Foreign exchange: Taxation encourages exports and restricts imports, Generally developing countries and even the developed countries do not impose taxes on export items.
Regional development: Taxation plays an important role in regional development, Tax incentives such as tax holidays for setting up industries in backward regions, which induces business firms to set up industries in such regions.
Control of inflation: Taxation can be used as an instrument for controlling inflation. Through taxation the government can control inflation by reducing the tax on the commodities.
VII. Project and activity
Question 1.
Collect information about the local taxes (water, electricity and house tax etc).
Answer:
Do it yourself.
Question 2.
Students purchase some goods on the shop. The teacher and students discuss those goods, maximum retail price, purchasing price or GST.
Answer:
Do it yourself.
Government and Taxes Additional Questions
I. Choose the correct answer.
Question 1.
……………. is an essential security function to protect our nation from our enemies.
(a) Foreign policy
(b) Defence
(c) Excise duty
Answer:
(b) Defence
Question 2.
From …………………. many economists had given lists of Canons of taxation.
(a) Marshall
(b) Adam Smith
(c) Pigou
(d) Malthus
Answer:
(b) Adam Smith
Question 3.
In India taxes are collected by all the ……………. tiers of government.
(a) two
(b) three
(c) four
Answer:
(b) three
Question 4.
A Government’s ability to raise taxes is called its …………………. capacity.
(a) Fiscal
(b) Monetary
(c) Defence
(d) None of these
Answer:
(a) Fiscal
Question 5.
The taxes on properties are collected by ……………… Governments.
(a) Local
(b) State
(c) Union
Answer:
(a) Local
Question 6.
The act of GST was passed in the parliament on 29th March :
(a) 2015
(b) 2016
(c) 2017
(d) 2018
Answer:
(c) 2017
Question 7.
…………….. is one of the major sources of black money.
(a) Saving
(b) Smuggling
(c) Shortage of good
Answer:
(b) Smuggling
II. Fill in the blanks :
1. The Union government is responsible for creating and maintaining ……………..
2. The ……………. conduct elections to local bodies within the state.
3. Tax means …………………
4. The present Indian tax system is based on the …………….. tax system.
5. …………… was the first country to implement GST in 1954.
Answers:
1. defence forces
2. state government
3. estimate
4. ancient
5. France
III. Match the following.
| 1. | Excise duty | (a) | Major sources of black money |
| 2. | Stamp duty | (b) | Unaccounted money |
| 3. | Entertainment | (c) | Tax paid for official documents |
| 4. | Black money | (d) | Movie ticket |
| 5. | Smuggling | (e) | Manufactured goods |
Answers:
1. (e)
2. (c)
3. (d)
4. (b)
5. (a)
IV. Short Answer:
Question 1.
Who levies tax? why?
Answer:
Tax is levied by the Government for the development of the State’s economy.
Question 2.
Write about corporate tax.
Answer:
It is levied on companies that exist as separate entities from their shareholders. It is charged on royalties, interest gains from sale of capital assets located in India and fees for a technical services and dividends.
Question 3.
What do you understand by local tax?
Answer:
Local tax is a tax charged by a local government such as a city or country.
Question 4.
Write about stamp duty.
Answer:
Stamp duty is a tax is paid on official documents like marriage registration or documents related to a property and in some contractual agreements.
Question 5.
What is the aim motto of goods and services tax?
Answer:
It aims to replace all indirect taxes levied on goods and services by the Central and State Governments. Its motto is “One nation, one market, one tax”.
V. Answer the following in detail.
Question 1.
What are the effects of Tax evasion.
Answer:
- Tax evasion results in black money.
- It prevents the resource mobilisation of the Central Government leading to shortage of funds.
- It leads to distorting saving and Investment pattern of the economy and availability of resources for various sectors of the economy.
- Tax evasion undermines the equity attributes of the tax system.
- Tax evasion and black money encourage the concentration of economic power in few hands.
- It consumers time and energy of tax administration to find out the tax evaders and put them under the right stream.
Question 2.
Explain the causes of tax evasions.
Answer:
(i) Tax evasion resulting in black money prevents the resource mobilisation efforts of the Union government. Shortage of funds distorts implementation of developmental plans and forces the government to resort to deficit financing in case public expenditure is inelastic.
(ii) Tax evasion interferes with the declared economic policies of the government by distorting saving and investment patterns and availability of resources for various sectors of the economy.
(iii) Tax evasion undermines the equity attribute of the tax system. Honest taxpayers willingly bear disproportionate tax burden, feel demoralised and lured to join the tax evaders’ camp.
(iv) Tax evasion and black money encourage the concentration of economic power in the hands of undeserving groups in the country, which, in turn, is a threatening to the economy in its way.
(v) Evasion of tax consumes time and energy of tax administration to disentangle the intricate manipulations of tax dodgers.