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Bipina Poudel
3 years ago Grade -12 (NEB) > Management Economics

Disadvantages of Direct Taxes

Discuss about the disadvantages of direct taxes.

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Bipina Poudel
3 years ago Answer Link CTEVT > Diploma/PCL > PCL In Medical Lab Technology Revised 2019

The main disadvantages of direct taxes are as follows:

  1. Inconvenient:
    The great disadvantage of direct tax is that it pinches the payer. He 'squeaks' when a lump sum is taken out of his pocket. The direct taxes are thus very inconvenient to pay.
  2. Evadable:
    Direct taxes are taxes on honesty and so people try to evade them by concealing their income, 
  3. Arbitrary:
    Another objection against direct taxes is that they are invariably levied arbitrarily by the government. No well-defined principles are considered while fixing the rates of taxes. This is against the spirit of social justice.
  4. Not suitable for Underdeveloped Countries:
    Direct taxes are not suitable for Underdeveloped countries like Nepal, where the majority of people are below the absolute poverty line.
  5. Obstacles to Capital Formation: If the taxes are too heavy, they discourage saving and investment. In that case, the country will suffer economically.
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