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      Question

      Which of the following best describes the principle of

      "Ability to Pay" in taxation?
      A Tax should be levied equally on all individuals. Correct Answer Incorrect Answer
      B Those who receive more government benefits should pay more tax. Correct Answer Incorrect Answer
      C Tax burden should be shared equally, irrespective of income. Correct Answer Incorrect Answer
      D Individuals should be taxed according to their capacity to bear the burden. Correct Answer Incorrect Answer
      E Tax should be levied only on luxury goods. Correct Answer Incorrect Answer

      Solution

      Explanation: The "Ability to Pay" principle is a fundamental concept in taxation which states that taxes should be levied based on an individual's ability to bear the financial burden. This means higher-income earners should contribute more because they can afford to, ensuring fairness and equity in the tax system. It forms the basis of progressive taxation.

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