The "Ability to Pay" principle is related to:
Options
AGovernment Expenditure
BTaxation
CPublic Debt
DBudgeting
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Public FinancePYQ - Nov 2019 (Inter)Question 134 of 20
All Questions Correct Answer
✅ Option b — Taxation
All Options:
- AGovernment Expenditure
- BTaxation
- CPublic Debt
- DBudgeting
Detailed Solution & Explanation
The "Ability to Pay" principle is a concept in taxation that suggests individuals with a higher income or wealth should contribute a larger share of taxes.
• This principle is based on the idea that those who have a greater ability to pay taxes should bear a larger portion of the tax burden.
• It is a key principle in taxation as it aims to reduce income inequality by redistributing wealth from the rich to the poor through government spending on public goods and services.
• The correct answer is related to taxation because it directly deals with how taxes are levied on individuals based on their income or wealth.
• Options like Government Expenditure and Public Debt are incorrect because they are related to how the government spends and borrows money, respectively, rather than how taxes are collected.
• Budgeting is also incorrect as it is a broader concept that involves planning and managing government finances, whereas the "Ability to Pay" principle is specifically related to taxation.
About This Chapter: Public Finance
Paper
Paper 4: Business Economics
Weightage
10%
Key Topics
Fiscal Policy, Budget, Market Failure
This chapter deals with government finances — how the government earns (taxation) and spends (expenditure) money. Key topics include Fiscal Policy, types of taxes (Direct and Indirect), the Union Budget, Public Debt, and the concept of Market Failure and how government intervention corrects it.
View Official ICAI SyllabusExam Strategy Tip
Focus on the difference between Revenue and Capital items in the budget. Understand Fiscal Deficit and its implications. Tax-related MCQs are commonly asked.
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