Question

Which one of the following statements regarding taxation is correct?

[1] In a good tax system, various taxpayers with different income are taxed the same.

[2] The aim of taxes is to distort relative prices and change the behaviour of taxpayers.

[3] Taxes which induce taxpayers to change their behaviour are not neutral.

[4] Administrative simplicity in the tax system ensures neutrality and equality.

Answer 1

[3] Taxes which induce taxpayers to change their behavior are not neutral.