In: Economics
1. Please describe the objective approach of ability to pay in economics according to HL Ahuja.
The objective approach to the principle of ability to pay takes the
objective basis of taxation into account, which measures the
ability to pay correctly. On this issue, too, there is even no
agreement. Income, however, is widely regarded as the best
predictor of payability.
The explanation is that the income of an individual determines the
power of a person over resources over a time to spend or to add to
his property. However, the ability to pay does not increase
directly with regard to money income. it can be noted.
The ability to pay raises in excess of the sales level. It is the
basis for the logic of gradual income tax.
Further, in order to ensure equity in taxing income distinction
ought to be made between earned income and unearned income, and
considerations should also be given for a number of dependents on
the person paying the tax.
Moreover, a distinction should be made between earned income and
unearned income in order to ensure equity in taxing income and for
a number of dependants on the tax payer, considerations should be
made.