OBJECTIVE TYPE Q & A 0N PUBLIC REVENUE
The Theory of Tax Structure Development, Changes in Tax Structure under the Impact of Economic Development,
The Theory of Tax Structure Development, Changes in Tax Structure under the Impact of Economic Development,
Q. State whether True or False:
1. There is no quid-pro-quo between tax
payers and the Government.
2. Fees are an important source of
commercial non-tax revenue.
3. Fines and Penalties are commercial
non-tax revenues to the Government.
4. Revenues in the form of profits and
interests are termed as administrative non-tax revenues.
5. Indirect taxes are imposed on goods and
services.
6. The impact and incidence of direct taxes
are not on the same person.
7. The burden of direct taxes cannot be
shifted.
8. The impact and incidence of indirect
taxes are on the same person.
9. Taxes on receipts of income are regarded
as indirect taxes.
10. Taxes on expenditure are regarded as
direct taxes.
11. Service tax was introduced in India in
1999-2000.
12. Fees involve quid-pro-quo to some
extent.
13. There is some element of quid-pro-quo
in the case of special assessment or betterment levy.
14. Impact refers to the initial or
immediate money burden of a tax.
15. Incidence refers to the final money
burden of a tax.
16. Service tax is an example of direct
tax.
17. The impact of a tax is the final
resting place of a tax.
18. The incidence of a tax is upon who
bears the first responsibility of paying the tax to the
authorities.
19. In forward shifting of a tax the
producer of a commodity transfers the money burden of the tax
to the wholesaler, retailer and finally to
the consumer.
20. In backward shifting the producer
shifts the money burden of the tax on to the suppliers of
factors of production.
21. In case, the price of a commodity does
not rise by the full amount of the tax, the consumer pays
only a part of the tax.
22. In the case of commodities having
inelastic supply, the tax imposed on them cannot be easily
shifted to the buyers.
23. In the case of commodities having
elastic supply the shifting of the tax is relatively easier.
24. The greater the elasticity of demand,
the higher the incidence of the tax on the sellers.
25. The greater the in-elasticity of demand
for the taxed commodity, the higher will be the incidence
of tax on the buyer.
26. The greater the in-elasticity of demand
the greater will be the proportion of the tax shifted to the
buyers.
27. The taxation of necessary items will
have a regressive effects.
28. In the case of luxuries, the burden of
tax will be more on the sellers.
29. In backward shifting the price of
factors of production is increased by the amount of tax and in
forward shifting the price is reduced by
the amount of tax.
30. During the rising prices it is easy to
shift taxes on to the price.
31. Shifting of a tax is easier in times of
higher demand.
32. In the case of indirect taxes, evasion
is easy.
33. Indirect taxes help to check the
consumption of harmful goods.
34. Indirect taxes guide resource
allocation in the economy.
35. Indirect taxes lack flexibility.
36. Indirect taxes have special
significance to under developed countries.
37. Indirect taxes bring justice to the
poor.
38. Indirect taxes may be inflationary.
39. Indirect taxes are less expensive to
manage compared to direct tax.
[Ans.: True : 1, 5, 7,12,13,14,15,19, 20, 21,
22, 23, 24, 25, 26, 27, 28, 30, 31, 33, 34, 36, 38 , 24, 25, 26, 27, 28, 30,
31, 33, 34, 36, 38
False: 2, 3, 4, 6, 8, 9,10,11,16,17,18, 29,
32, 35, 37, 39] 37, 39]
Q. State
whether the following statements are true or false
1. Proportional tax is based on the
principle 'higher the income, higher the tax'.
2. A tax is said to be regressive when its
burden falls more heavily on low-income earners.
3. Income tax is a form of tax which is
levied on individual's total earnings.
4. A wealth tax is a levy upon individuals
not on corporations.
5. Canon of certainty means the tax which
each individual is bound to pay ought to be
arbitrary.
6. The tax will be economical if the cost
of collection is very small.
[Ans: 1. False, 2. True, 3. True, 4. True, 5. False, 6. True
Q. State
with reason whether the following statements are true or false.
1. The burden of a direct tax cannot be
shifted to someone else.
2. Direct taxes are based on the principle
of equity.
3. Direct tax may lead to corruption in the
economy.
4. Direct taxes refer to the type of tax
which is indirectly imposed on a person.
5. The burden of indirect tax can be
shifted to other person.
Ans: 1.True,2. True, 3.
True, 4. False, 5. True.
Q. State
whether the following statements are True or False
1. In direct tax, the burden can be
shifted. (False)
2. In indirect tax, the burden can be
shifted to another peroson. (True)
3. Direct taxes are regressive in nature.
(False)
4. The impact and incidence of direct taxes
are on the same person. (True)
5. The impact and incidence of indirect
taxes are on the same person. (False)
6. Direct taxes are progressive in nature
(True)
7. Indirect taxes are regressive in nature
(True)
8. Direct taxes are inequitable. (False)
9. Direct taxes help to reduce
inequalities. (True)
10. The sacrifice in case of indirect tax
is greater than direct tax of the same amount.
(True)
11. Direct taxes are less elastic. (False)
12. Indirect taxes are growth oriented than
direct taxes. (True)
13. In developing countries, indirect
taxation brings more revenue than direct taxation
(True)
Q. State
whether the following statements are true or false
1. Impact taxation refers to the final
burden of the tax.
2. Incidence of taxation refers to the
ultimate burden of the tax.
3. Impact is at the point of imposition,
incidence occurs at the point of settlement.
4. The impact of a tax falls upon the
person from whom the tax is collected.
5. Impact may be shifted but incidence
cannot.
Ans: 1. False, 2. True, 3. True,4. True, 5. True
Q. Objective Type Q & A
1. The objective of taxation by the
Government are -
a. Raising revenue for the state
b. To maintain economic stability
c. To remove disparities in the
distribution of income
d. All of the above
2. Which of the following is not a direct
tax?
a) Personal Income Tax b) Service tax
c) Wealth Tax d) Corporate Income Tax
3. Transfer Payments include -
a) Old Age Pension b) Subsidies
c) Wealth Tax d) Corporate Income tax
4. The following is an example of
commercial non-tax revenue - a) Gifts and Grants b) Fees
c) Fines d) Surpluses
5. The following is an example of administrative
non-tax revenue, a) Surplus of public
undertaking b) Gifts
c) Fees d) Grants
6. On what broad aspect of commodities are
indirect taxes imposed, a) Production b) Sales
c) Movement d) All of the above
7. The following is not a characteristic of
a tax.
1. It is a compulsory payment
2. Every tax involves a sacrifice by tax
payer
3. There is a quid-pro-quo between the tax
payer and the Government.
4. Refusal to pay tax is a punishable
offence.
8. The following is a characteristic of
indirect tax -
1. The impact and incidence are not on the
same person.
2. It is levied on income.
3. Taxes are progressive in nature.
4. All of the above
9. The following is a characteristic of a
direct tax -
1. Incidence may be shifted
2. Imposes more burden on poor
3. The impact and incidence are on the same
person
4. All of the above
10. In India service tax was introduced in
-
a) 1991-92 b) 1994-95 c) 1999-2000 d)
2005-06
11. Special assessment is also known as -
a) Tax Revenue b) Battement Levy
c) VAT d) None of the above
12. Impact of a tax refers to -
a) Final money burden b) Immediate money
burden
c) Indirect real burden d) None of the
above
13. After levying of a tax, if the price
does not rise at all, it means that -
1. Incidence of the tax remains with
producer
2. Tax has been shifted backward
3. Shifting has taken place
4. Any of the above
14. Which factor has no role in the
shifting of a tax?
a) Change in prices b) Elasticity of demand
and supply
c) Nature of Demand d) Income of the
consumer
15. Pick out the statement which is not
true with regard to tax shifting.
1. A purely local tax can be shifted if it
is heavy.
2. A purely local tax shifted if it is
light
3. Shifting becomes difficult if the people
purchase from outside the locality.
4. None of the above
16. Pick out the incorrect statement.
1. In the short period, shifting of a tax
is easy.
2. In the long period shifting of a tax is
easy.
3. When supply is elastic, shifting is
easy.
4. None of the above.
17. Pick out the tax which is not a part of
indirect tax. a) Excise Duty b) Sales Tax
c) Entertainment Tax d) Corporate Tax
18. Pick out the characteristic which is
not true of direct tax.
1. Simplicity
2. Elasticity
3. Creates Civic Consciousness
4. Encourages savings and investment
19. Pick out the factor which is not a
feature of indirect taxes.
a) Convenience b) Tax evasion is difficult
c) Fair to the poor d) Powerful tool of
economic policy
20. Pick out the factor which is not a
demerit of indirect taxes.
a) Unjust to poor b) Inflationary in nature
c) A tool of economic policy d) High
administrative cost
[Ans. : (1 - [Ans. : (1 -d), (2 -b), (3
-d), (4 -d), (5 -c), (6 -d), (7 -c), (8 -a), (9 -c), (10 c), (11 -b), (12 -b), (13 -d), (14 d), (15 d),(16 a), (17 a), (18 d), (19 d), (20 c)
Q. Choose
the most appropriate answer
1. An ad valorem tax is charged according
to the
(a) Value of a commodity (b) Weight of the
commodity
(c) Size of the commodity (d) None of the
above
2. Specific duty is charged according to
...
(a) Value of a commodity (b) Weight of the
commodity
(c) Size of the commodity (d) None of the
above
3. An example of direct tax is .....
(a) Sales tax (b) Central excise duty
(c) Custom duty (d) Wealth tax
4. ....................... based on the
principle 'higher the income, higher the tax'.
(a) Progressive Tax (b) Proportion Tax
(c) Regressive Tax (d) Digressive Tax
[Ans: 1. (a), 2. (b), 3. (d), 4. (a)
1. Generally, the nature of indirect tax is
……………
(a)
Progressive (b) Regressive (c) Proportional (d) None of the above
2. Direct tax are………….. in nature.
(a) Progressive (b) Equitable (c)
Regressive (d) None of the above
3. An increase in the direct tax means it
is……………..
(a)
Inflationary (b) Anti-inflationary (c) Having no impact on price (d) None of
the above
[Answers: 1 [Answers: 1 Answers: 1(b),
2(a), 3. (b) (a), 3. (b) (a), 3. (b)]
Choose the most appropriate answer and
rewrite the statement. statement.
1. The term impact of taxation means ......
a. (a) Initial burden of the tax (b)
Ultimate burden of the tax
b. (c) Burden of tax on government (d) None
of the above
2. The term incidence of taxation refers to
.....
a. (a) Initial burden of the tax (b) Final
burden of the tax
b. (c) Burden of tax on government (d) None
of the above
3. The ultimate burden of taxation on
producer implies ....
(a) Inelastic Supply and Elastic Demand (b)
Elastic Supply and Demand
b. (c) Inelastic Supply and Demand (d)
Elastic Supply and Inelastic Demand
4. The shared burden of taxation on
consumer and producer implies
(a) Inelastic Supply and Elastic Demand (b)
Elastic Supply and Demand
(c) Inelastic Supply and Demand (d) Elastic
Supply and Inelastic Demand
[Ans: 1. (a), 2. (b), 3. (a), 4. (b)
B. True and False
1. Expenditure on defence, interest
payments, law and order maintenance and public
administration expenses are unproductive
expenditure.
2. Wagner's law was put forward by Dalton.
3. Old age pension is non-transfer
expenditure.
4. Sometimes preparation and passing of the
budget may have to be done more than once in a year.
5. A supplementary budget is considered
during periods of war or natural calamity.
6. The budget is mean: to correlate,
compare and co-ordinate the financial administration of the
various government departments.
7. In the absence of the budget, the
ministries and departments are able to collect and spend
money, in a proper manner.
8. Railway budget if an example of
departmental budget.
9. In an executives budget the estimates of
revenues and expenditure are prepared by the different
ministries and departments before
forwarding to the ministry of finance
10. The executive budget is better than the
legislative budget.
11. A balanced budget is one in which
public revenue equals public expenditure.
12. Functional classification only covers
the expenditure side.
13. Expenditure on economic services like
agriculture and transports is a part of non-development
expenditure.
14. Expenditure on justice and police is a
part of developmental expenditure.
15. Productive debts are self-liquidating
in nature.
16. Unproductive debts arc not burdensome
on the community.
17. There is no direct money burden of
internal debts.
18. Unfunded debts are long-term debts.
19. Funded debts are repayable within a
short period of time.
20. Market borrowings are a part of
external liabilities of the Government.
21. Treasury bills constitute major source
of long term fund.
22. Bonds are a part of internal debt
credit instrument for the government.
23. Special floating loans are non-
negotiable non-interest bearing short term debt of the
government.
24. Ways and means advances provide support
in times of difficulties and are given for short
periods.
25. Debt management has nothing do with the
monetary management of the country.
26. Public debt management has economic,
social and political significance.
27. If a debt is self-liquidating there is
no need to impose new taxes or increase the rate of old taxes.
28. The expenditure of the government has
increased due to the emergence of welfare state.
29. For achieving economic stability, the
objective of low interest cost will have to be sacrificed
30. A well co-ordinated mix of fiscal and
monetary policy will remove economic instability and
promote growth.
31. Public debt policy has no connection to
economic stability and growth.
32. The funding operations should not lead
to a rise in the long term rateof interest.
33. Traditional theory believed that
government need not pay off the debt at the earliest.
34. According to the traditional theory,
debt repayment policy should shaped as per the needs of
circumstances.
35. Repudiation of debt is not a desirable
method of debt management.
36. In the caseof external debt,
repudiation may lead to serious difficultiesforj a country which
repudiates the debt.
37. In refunding, the short term loans are
replaced by long term loans.
38. For practical purposes refunding and
conversion serve the same purpose.
39. In conversion, the form of debt is
changed by altering a public debt froma higher rate of
interest to a lower rate of interest.
40. A properly managed sinking fund will
help on orderly debt retirement] process.
41. Capital levy is of a recurring nature.
42. Capital levy is advocated to repay the
debt raised during a war.
43. Fiscal deficit is a more comprehensive
measure of budgetary imbalance.
44. Budgetary deficit is the difference
between all receipts and expenditure the revenue account.
45. Interest payments and servicing of
debts are examples of revenue expenditure.
46. One of the objectives of the FRBM Act,
2003 was to improve transparency in the fiscal
operations of the government.
47. The FRBM Act, 2003 was able to tackle
social sector development issues
[Ans.: True :1, 4, 5, 6, 9,
10, 11, 12, 15, 17, 23, 24, 26, 28, 23, 24, 26, 28,29, 30, 32, 35, 36, 37,38, 39, 40, 42, 43, 45, 46 ;
False:
2, 3, 7, 8,13,14,16,18,19, 8,13,14,16,18,19, 8,13,14,16,18,19,20, 21, 25, 31,
33, 34, 41, 44, 47]
Q. true or false.
1. An unproductive debt is one which does
not yield 1 any income.
2. Government borrowings within the country
are known as internal debt.
3. Loans which government promises to pay
off at some future date are called redeemable
debts.
4. Funded debt is normally obtained on
short-term basis.
5. Unfunded debts are long-term debts.
6. During recent years, public debt in
India has been growing at an alarming rate.
7. The external debt-GDP ratio has risen
since 1990-91.
8. External debt creates more burden than
internal debt.
[Ans: 1. True, 2. True, 3. True, 4. False,
5. False, 6. True, 7. True, 8. True]
Q.
true or false.
1. Under FRBM Act, rules are framed
relating to fiscal responsibility of the Central
Government, which came into-force on 5th
July, 2004.
2. The first objective of the Act is to
make the Government responsible to "ensure intergenerational
equity in fiscal management".
3. The Act mandates the central government
to take appropriate measures to reduce fiscal
deficit and revenue deficits so as to
eliminate the Revenue deficit by March 31, 2009.
4. It requires the reduction in fiscal
deficit by 0.3% of GDP each year and the revenue deficit by
0.5%.
5. The central government shall not borrow
from the Reserve Bank of India except by way of
advances to meet temporary excess of cash
disbursements over cash receipts.
[Ans: 1. True, 2. True, 3. True, 4. True,
5. True
Q.
Choose appropriate answer
1. Transfer payments include
a) Old age pension b) Subsidies
c)
Interest on public debt d) All of the above
2. Interest payments are a part of –
a) Development Expenditure b)
Non-Development Expenditure
c) Capital Expenditure d) All of the above
3. Bharat Nirman, MGNREGA are examples of -
a) Plan Expenditure b) Non-Plan Expenditure
c) Capital Expenditure d) None of the above
4. Which of the following is not true of
public budget?
a) A budget contains only proposals of
taxation.
b) It refers to the policies of the
government.
c) It contains the estimated receipts and
proposed expenditure.
d) It reflects the programmes of the
government.
5. The number of sections of a good budget
are –
a) Two b) Three
c)
Five d) Eight
6. The budget presented wken elections are
due is known as –
a) Tentative Budget b) Proposed Budget
c) Zero Budget d) Lame Duck Budget
7. Pick out the feature which is not
applicable to a good budget,
a) Comprehensiveness b) Clarity
c) Objectivity d) Lengthy
8. The finance commission's role is to -
a) Propose New Taxes
b) To Abolish Old taxes
c) To review and modify arrangements
d) None of the above
9. Pick out the item which is not a part of
the plan expenditure,
a) Agriculture b) Industry
c) Social Services d) Defence
10. Pick out the item which is not a part
of capital budget.
a) Market Borrowings b) Sale of Treasury
Bulls
c) Revenue from Industry d) Net Small
Savings
11. Pick out the factor which is not a part
of revenue budget.
a) Current consumption expenditure on
commodities.
b) Current consumption expenditure on
services
c) Transfer payments
d) Expenditure on machinery
12. Pick out the item which is not a part
of non-tax revenue,
a) Interest Receipts b) Dividends
c) Customs d) Profits
13. Pick out the item which is not a part
of tax revenue.
a) Interest b) Corporate Tax
c) Excise d) Customs
14. Pick out the item which is not a part
of non-plan expenditure on the revenue side.
a) Defence b) Central Assistance to states
c) Subsidies d) None of the above
15. Debts which have to be paid at some
specific future date are known as –
a) Redeemable Debts b) Irredeemable Debts
c) Treasury d) None of the above
16. Loans taken by the government for
purpose of war, earthquakes for covering budget deficit are -
a) Productive Debts b) Unproductive
c) Voluntary Debts d) None of the above
17. Which of the following is not an
objective of public debt management.
a) Loans at low cost
b) Repayment over a long period 3
c) Stabilisation of the level of economic
activity
d) Economic growth
18. Which is / are the advantages of
redemption of debt.
a) Saves the government from bankruptcy
b) Reduces Cost
c) Saves future generation from the
pressure of public debt
d) All of the above
19. Pick out the feature which is not true
in the case of repudiation of debt.
a) Simplest method of liquidating a debt.
b) It will increase the credibility of the
government.
c) Debtors may face loss.
d) It is discriminating
20. Pick out the method which is not a part
of redemption,
a) Sinking Fund b) Surplus Budget
c) Terminal Annuities d) Refunding
21. The method by which a certain portion
matures every year as decided by the lottery system.
a) Sinking Fund b) Surplus Revenues
c) Terminal Annuities d) None of the above
22. Pick out the feature which is not true
of a capital levy.
a) For paying off unproductive debt.
b) It is paid by those who earn huge
profits.
c) It does not follow the principle of
equity.
d) It helps to fight inflation.
23. Which of the following is the most
comprehensive measure of budgetary imbalances?
a) Fiscal Deficit b) Revenue Deficit
c) Primary Deficit d) All of the above
24. The full form of FRBM Act 2003 is1.
Fiscal Regulation and Budget Management
Act, 2003.
2. Fiscal Regulation and Banking Management
Act, 2003.
3. Fiscal Responsibility and Budget
Management Act, 2003.
4. Financial Responsibility and Budget
Management Act, 2003.
25. When budget revenue equals expenditure
the budget shows - a) Balance b) Deficit
c) Surplus d) None of the above
26. The term fiscal federalism was
introduced by -
a) Dalton b) Seligman
c) Musgrave d) None of the above
27. The theory of fiscal federalism assumes
-
1. A federal system of government can be
efficient and effective in solving problems.
2. A federal government will be able to
bring about economic stability allocation of resources.
3. Since states and localities are not
equal in their income, federalism is helpful.
4. All of the above
[ Ans.: (1 - [ Ans.: (1 -d), (2 -b), (3
-a), (4 -a), (5 -b), (6 -d), (7 -d), (8 -c), (9 -d), (10 d), , (11 c), (12 d), (13 - c), (14 a), (15 b), (16 a),(17 b), (18
b),(19 d), (20 b), (21 d),(22 c), (23 c),(24 -c), (25 c), (26 a), (27 c]
Q. Choose
the most appropriate answer
1. Public Expenditure refers to ...........
(a) Government Expenditure (b) Private
Expenditure
(c) Private Expenditure (d) None of the
above
2. The major objectives of public
expenditure are .......
(a) Economic Growth (b) Maintenance of
Defence
(c) Social Welfare (d) All of the above
3. The defence expenditure minimizes the
possibility of .....
(a) External threats (b) Internal threats
(c) Terrorism (d) All of the above
4. An empirical law to the effect of
growing public expenditure was propounded by
(a) Wagner (b) Peacock (c) Wiseman (d) None
of these
5. According to H.C. Adams' public
expenditure has to perform the ....
(a) Protective Function (b) Commercial
Function
(c) Developmental Function (d) All of the
above
[Ans: 1. (a), 2. (d), 3. (d), 4. (a), 5.
(d)
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