Advantage of Direct Tax

In case of direct tax, the tax-payer is the tax-bearer. The impact i.e. the initial burden and its incidence i.e. the ultimate burden of direct tax is on the same person.

Advantages/merits of direct taxes: 

 Following are the important advantages of direct taxes:

1. Equity: There is social justice in the allocation of tax burden in case of direct taxes as they are based on the principle of ability to pay. Persons in a similar economic situation are taxed at the same rate. Persons with different economic standing are taxed at a different rate. Hence, there is both horizontal and vertical equity under direct taxation. Progressive direct taxation can reduce income inequalities and bring about adequate social & economic justice. 
2. Certainty: As far as direct taxes are concerned, the tax payer is certain as to how much he is expected to pay, as the tax rates are decided in advance. The government can also estimate the tax revenue from direct taxes with a fair accuracy. Accordingly, the government can make adjustments in its income and expenditure. 
3. Relatively elastic: The direct taxes are relatively elastic. With an increase in income and wealth of individuals and companies, the yield from direct taxes will also increase. Elasticity also implies that the government's revenue can be increased by raising the rates of taxation. An increase in tax rates would increase the tax revenue. 
4. Creates public consciousness: They have educative value. In the case of direct taxes, the taxpayers are made to feel directly the burden of taxes and hence take keen interest in how public funds are spent. The taxpayers are likely to be more aware about their rights and responsibilities as citizens of the state. 
5. Economical: Direct taxes are generally economical to collect. For instances, in the case of personal income tax, the tax can be deducted at source from the income or salaries of the individuals. Therefore, the government does not have to spend much in tax collection as far as personal income tax is concerned. 
6. Anti-inflationary: The direct taxes can help to control inflation. During inflationary periods, the government may increase the tax rate. With an increase in tax rate, the consumption demand may decline, which in turn may reduce inflation.