Question

9. Tax principles

Excessive alcohol consumption can lead to liver failure as well as deterioration of other organs. Suppose the government has opened several public clinics dedicated to helping alcoholics reduce their alcohol consumption. Now the government is trying to decide how to fund these clinics.

One suggestion is to raise the funds for the public clinics with a liquor tax. This tax follows:

The benefits-received principle

The ability-to-pay principle

Neither the ability-to-pay nor the benefits-received principle

Answer 1

Answer - This type of tax states the Benefits Received principle . The government is providing the facility of providing the clinics to deal with the health problems of those who drink. Hence the people will get the benefit of the government services . Hence they should pay for the benefits received.

The ability to pay will not be here because it depends upon the wealth of the person which is not the situation here.