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Disadvantages of direct tax

Answer Text:
DEMERITS OF DIRECT TAX
i. Encourage avoidance and evasion; whenever possible people come up with ways of reducing the amount of tax payable by falsifying information or just ignoring payment.
ii. Discourage investment/deterrent to investment; Heavy taxation on profits discourage people from
investing in risky but profitable businesses
iii) Discourage work/deterrent to work; High rate of direct tax may deter people from working harder as people may opt for leisure instead of working extra time.
iv. Unpopularity; the burden of the tax (incidence and impact) of tax is borne by the tax
payer directly and at once. This makes direct taxes very unpopular.
v. May inconvenience the tax payer; the tax payer has to comply with complicated formalities relating to sources of income as well as the expenses incurred while generating it. This may force the tax-payer to engage the services of tax
experts who have to be paid.
vi. Lack of civic awareness; on tax payers are not interested in scrutinizing government expenditure as they do not feel the pinch of paying tax.