(i) According to critics, the benefit principle does not obey the principle of justice. The benefit theory of taxation or benefit of tax has been criticised on the following ground. Criticism of benefit of taxation or benefit of tax The higher the benefits, the higher is the tax and vice-versa. It means taxation goes in proportion to the benefit enjoyed by the people. The percentage of taxes also increase from OM to OM1. Here AB is the benefit line.įrom the above figure, it is clear to us that when benefit increases from OP to OP1. On OY axis we measure percentage increase in benefit. On OX axis we measure percentage increases in taxes. This principle of taxation has been explained with the help of a following diagram. We get-Īggregate benefit = Total volume of taxes. Therefore, according to the benefit theory of taxation or benefit of tax. In this way, this theory emphasises that justice in taxation should be done it taxes are imposed in proportion to the benefit enjoyed by the people from the various services of the government.
Thus taxation is just like a price for the services provided by the government. should not impose the taxes greater than the benefits received by the tax payers.
The person receiving equal benefits from the government should pay equal amount as taxes and those receiving greater benefits should pay more as taxes than those receiving less benefits.
Criticism of benefit of taxation or benefit of taxĪccording to benefit theory of taxation, the burden of tax must be in proportion to the benefit received by a person from the expenditure made by the government.
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