PLAGIARISM FREE WRITING SERVICE
We accept
MONEY BACK GUARANTEE
100%
QUALITY

Impact of Direct Taxes on Consumer Equilibrium

Content
  1. OBJECTIVE
  2. INTRODUCTION
  3. DIRECT TAX
  4. CONSUMER EQUILIBRIUM
  1. DIRECT TAX
  2. INDIRECT TAX
  3. CONSUMER EQUILIBRIUM
  4. LITERATURE REVIEW
  5. Latest IRI Research Finds a New Consumer Equilibrium Emerging as Overall economy Is constantly on the Transform -
  6. It is not any solution that the ongoing financial turmoil is significantly influencing consumers' shopping and buy behaviors. Individuals are eating dinner out less, reducing the number of doctor appointments and foregoing trips to expand their limited dollars. But, which consumer groups are travelling these cost-saving strategies? The most recent research from Information Resources (1) The data and information assets of an organization, department or device. See data supervision.
  7. Gidwan, Sunil and Desai, Jignesh, October, 2010, "New Direct Tax Code: Impact on Banking sector", THE ANALYST. Based on the writer, The DTC is a good step taken by the Government of India to reduce litigations and simplify the tax provisions followed for practically five ages. The bank sector performs a essential role in the economic development of any country. In India, the financial service sector is now acknowledged as the next growth engine. It is therefore critical that fiscal guidelines acknowledge this role and through various options support and strengthen the sector. Regardless of the representation made on behalf of the financial service sector following the first draft of the Direct Tax Code (DTC), the new DTC does not seem to handle some of the problems encountered by the bank sector. India has a much better banking system set up, when compared with the other developing countries, but there are several conditions that have to be addressed to be able to ensure these issues do not remain as hurdles in the continual economic development of the country. . A number of stringent proposals were brought in the draft Direct Taxes Code, 2009. There have been several regions of concern. Many of them, such as asset-based Minimum amount Alternate Tax (MAT) and treaty override, were addressed by the Fund Minister through the discharge of a Revised Discussion paper earlier in June this year
  8. SOURCE OF DATA:
  9. ANALYSIS WITH THE TOPIC
  10. The direct taxes and the buyer equilibrium has a direct relationship with each other. The direct duty code slabs impact the consumer in lots of ways and it's not merely only direct taxes that comes with an impact on the consumer equilibrium there are many other things that benefit consumer equilibrium. Once the direct tax that happen to be implemented on the individual are low, i. e. , the speed of tax that a consumer has to pay is minimal, it provides him the larger window to earn much more money as less overall will be deducted from his profits. Because of this the budget type of the buyer will show the deviation, it will move towards right side
  11. QTY OF B
  12. Fig a:High direct taxes Figb: Low direct tax
  13. As we can easily see the above number depicts if the direct tax that the average person must pay are lowered than there will be the upwards shiftment of the budget line which will allow the consumer to buy more products by increasing his budgets. Indifference curve in the number plays an important role, indifference curve should be tangential to the budget brand because it is the most maximum level of which the consumer might use his budget to get maximum satisfaction. The next conditions should be kept in mind for consumer equilibrium:
  14. Consumer spends all the income in buying two commodities ;hence point of equilibrium will rest on budget series.
  15. The point of equilibrium will be on the highest possible indifference curve that consumer can reach.
  16. Slope of indifference curve should be add up to the slope of budget line. In other words:
  17. MUm/MUn = Pm/Pn
  18. There are also some major factors that has influence on consumer equilibrium, which are as under:
  19. Price Result:
  20. Income effect:
  21. Substitution Effect:
  22. MERITS/DEMERITS OF DIRECT TAX
  23. MERITS OF DIRECT TAXES
  24. DEMERITS OF DIRECT TAX
More...

OBJECTIVE

This term newspaper has been done to be able to check and determine the result of varied factors of the direct tax that contain a direct effect on the consumer equilibrium. The main objective of this term paper is really as under:

To determine what is direct taxes and consumer equilibrium

Analysis of articles

Impact of direct duty and other factors on consumer equilibrium.

INTRODUCTION

In launch, we will start with the basic like- what is direct taxes and what is consumer equilibrium. We will discuss these two in a elaborated manner.

DIRECT TAX

CONSUMER EQUILIBRIUM

DIRECT TAX

The term direct taxes generally means a tax paid directly to the government by the folks on whom it is imposed. In the overall sense, a direct duty is one paid right to the federal government by the individuals. on whom it is enforced (often accompanied by a tax return filed by the taxpayer). For example some taxes, some corporate fees, and transfer fees such as property (inheritance) taxes and gift tax. With this sense, a primary duty is contrasted with an indirect duty or "collected" duty (such as sales duty or value added duty (VAT)); a "collected" duty is the one that is gathered by intermediaries who turn over the proceeds to the federal government and record the related tax come back. Some commentators have argued that "a primary tax is the one which cannot be shifted by the taxpayer to someone else, whereas an indirect duty can be.

The direct tax meaning is not complete until we do not define or put some light on indirect tax, thus-

INDIRECT TAX

A tax that's not evaluated on and collected from those who find themselves intended to bear it. Unlike a direct duty, it cannot take individual circumstances into account. Although levied on

Producers, the responsibility of the indirect taxes may be 'switch' to consumers.

Ex: value added duty, sales duty, payroll tax and excise duties

CONSUMER EQUILIBRIUM

When consumers make selections about the quantity of goods and services to consume, it is presumed that their objective is to maximize total utility. In increasing total utility, the consumer faces lots of constraints, the main of which will be the consumer's income and the costs of the goods and services that the consumer wishes to consume. The consumer's effort to maximize total utility, subject to these constraints, is referred to as the consumer's problem. The solution to the consumer's problem, which includes decisions about how precisely much the buyer will ingest of a number of goods and services, is known as consumer equilibrium.

Determination of consumer equilibrium. Consider the simple case of any consumer who cares about consuming only two goods: good 1 and good 2. This consumer recognizes the prices of goods 1 and 2 and has a fixed income or budget you can use to purchase quantities of goods 1 and 2. The consumer will purchase quantities of goods 1 and 2 in order to completely exhaust the cover such purchases. You see, the quantities purchased of every good are dependant on the condition for consumer equilibrium, which is

This condition areas that the marginal power per dollar allocated to good 1 must equal the marginal tool per dollar spent on good 2. If, for example, the marginal electricity per dollar allocated to good 1 were higher than the marginal energy per dollar allocated to good 2, then it could seem sensible for the consumer to get more of good 1 rather than purchasing any more of good 2. After purchasing more and more of good 1, the marginal utility of good 1 will eventually fall because of the rules of diminishing marginal utility, so the marginal utility per dollar spent on good 1 will eventually equal that of good 2. Obviously, the total amount purchased of goods 1 and 2 can't be limitless and can count not only on the marginal resources per dollar spent, but also on the consumer's budget.

LITERATURE REVIEW

Hegde, Prakash and Barve, Nachiket, June 27, 2010, "Impact of direct taxes code on specific", BUISNESS Brand says that Though most of the existing provisions of the income-tax rules are finding put in place the DTC, many procedures are new or customized that will have an impact on the individuals significantly. The prominent ones are like DTC proposed significant decrease in individual income-tax by increasing duty slabs - 30 per cent duty rate at money degree of Rs 25 lakh (present - Rs 8 lakh). If proposed tax slabs and rates are implemented, then taxpayer's take-home pay may see a substantial hop. However, in view of relaxation or rollbacks of other tax proposals, one has to wait and watch whether Government still intends to own proposed taxes slabs and rates. EEE preferred over EET, EET brings about higher duty at retirement in contrast to potential to pay. Recognising the fact of lack of a well toned interpersonal security system and other issues (complex / administrative) Government thought it fit to maintain EEE and incomplete EET. Among the strange provisions in DTC, which hadn't caught general population attention but make a difference a man travelling abroad, is decorating an undertaking to the tax officer to the result that he has made "satisfactory design" for discharging his taxes liability in India before he leaves India. The taxes officer has to concern a no-objection certificate for his travel. If travel is manufactured with out a no-objection certificate from the taxes office, the owner or charterer of the plane will be held responsible to pay the fees anticipated, if any. This process would have been more of a hurdle than a smooth drive.

Gillingham, Robert and Greenlees, John S, 4 August 1987, "The Impact of Direct Taxes on the expense of Living" says in the article that, a cost-of-living index including immediate fees. They show its romance to the traditional index and illustrate how non usage costs are properly treated. They then determine a fixed-weight approximation, a tax and price index (TPI). Using federal, talk about, local, and interpersonal security taxes rates for 1967- 85, the authors develop gross annual TPI series predicated on household data. They realize that inclusion of direct fees has sizable influences on the estimated rate of inflation. Partitioning their household sample, they find that recognition of fees significantly alters inflation rate differentials estimated using utilization prices by themselves.

Subramani, V. K, 29, August 2010, "Expectation from code revision", according to the author, There's a huge expectation that the modified Code would solve the concerns of the taxpayers at large, by retaining the existing taxes concessions and providing even transition, with reduced scope for confusion or litigation. There exists Positives, negatives traits of the code. There are some positives in the first draft of the DTC, such as: (i) lowest rate of personal taxes at 10 per cent for earnings up to Rs 10 lakh;(ii) deduction according of personal savings (just like Section 80C) up to Rs 3 lakh;(iii) presumptive taxation of income for turnover up to Rs 100 lakh;(iv) short-term capital damage under the present legislation, called as 'terminal allowance' in the DTC, eligible for deduction while processing business income; and(v) making reference to 'financial time' rather than the presently used conditions such as 'previous season' and 'diagnosis yr'. The negatives of the DTC, prima facie, include: (i) clubbing of spouse income with the income of partner, whoever has higher income;(ii) restricting the exemption according of gathered balance in provident account profile up to March 31, 2011;(iii) denying carry onward of business reduction to any yr, if the come back is filed beyond the 'scheduled day' both in the entire year of incurring loss and any following year in which it is carried forward with or without tripped ;(iv) denying deduction in respect of medical treatment expenditures (present Section 80 DDB) to HUF;(v) reduction in time period limit for moving order of rectification to two years;(vi) advancing the particular date for processing the go back of tax basic and imposing charges for failing to file taxes base return before the 'due particular date' as against today's time limit of March 31 of the evaluation year; and(vii) supplying precedence to the DTC in the event of discord between DTAA and DTC.

Parthasarathy, Suresh, 20, June 2010, "How the revised tax code impact us", BUISNESS Range, says that without social security the suggested EET (Exempt-Exempt-Taxed) framework was severe on individuals, the modified code has suggested to bring some comfort to long-term savings investment such as PF, PPF, New Pension System, approved pure life insurance coverage, annuity schemes and GPF. These will now be subject to the Exempt-Exempt-Exempt (EEE) method of taxation rather the EET model suggested this past year. . The modified DTC proposes to follow the existing method of tax deduction on mortgage loan at least for the eye paid. In case of the house being self-occupied, the average person will qualify for deduction of interest on capital borrowed for acquisition or construction of the home, at the mercy of a roof of Rs 1. 5 lakh, from the gross total income. This revised proposal is a differ from the earlier stand of disallowing taxes exemptions on the interest and primary paid on house property. The New Pension Design, was struggling to find patronage owing to uncertainties associated with its tax framework. In a try to make this program more attractive also to introduce some flexibility to make withdrawals in lump total without being at the mercy of taxation, the modified code proposes to extend the EEE method of taxation to the pension plan implemented by the Pension Finance Regulatory and Development Authority, aside from PF, GPF and accepted Provident Funds. Beneath the modified code, capital gains arising on account of transfer of equity shares or systems of an equity oriented fund performed for several calendar year will be computed after allowing a deduction at a particular ratio of capital profits without any indexation.

Buch, Drupadh, 30 July 2010"How Revised Direct Fees Code Will Impact OLDER PERSONS", EZINE ARTICLES, in line with the author of the article, it suggests that how direct tax has effect on senior citizen there has not made any changes in the Income Tax Rates and Income Tax Slabs that were proposed in the initial draft. Which means there is no change in the essential exemption limit for the OLDER PERSONS (resident individual of 65 years or above), which is 240, 000 per yr. In the revised DTC, there is absolutely no change in the limit of deductions from taxable income for personal savings in specified opportunities. In the original draft, the limit has been proposed to be modified to 300, 000 from the present limit of 100, 000. However, it should not make much difference to the OLDER PERSONS, as the tax incentives for savings are basically designed for the youngsters. , the retirement life benefits such as gratuity, commuted pension, voluntary retirement payment and leave encashment will be exempt from tax subject to specified limits. Original Draft DTC had proposed a structure of deferment of duty on old age benefits, that is, the retirement life benefits wouldn't normally be taxed if it were committed to a Special Pension Benefit Account, which would be subsequently taxed in the entire year of drawback. In the New DTC, whether it be in the initial draft or in the modified discussion paper, there is nothing quite definitely special for the older persons except the bigger tax slabs and the corresponding reduced taxes rates. If the essential exemption limit of 240, 000 for older persons were revised significantly, it would have definitely been a great boon to the Senior Citizens.

Latest IRI Research Finds a New Consumer Equilibrium Emerging as Overall economy Is constantly on the Transform -

It is not any solution that the ongoing financial turmoil is significantly influencing consumers' shopping and buy behaviors. Individuals are eating dinner out less, reducing the number of doctor appointments and foregoing trips to expand their limited dollars. But, which consumer groups are travelling these cost-saving strategies? The most recent research from Information Resources (1) The data and information assets of an organization, department or device. See data supervision.

(2) Another name for the Information Systems (IS) or Information Technology (IT) department. VIEW IT. , Inc. (IRI), Competing in a Transforming Overall economy 4. 0: The New Equilibrium leverages post-inaugural study results to identify key consumer segments that are leading the change and helps stores and manufacturers hook up with their most significant consumers.

Since the beginning of 2009, a new consumer equilibrium has surfaced in which behaviors initially executed to weather the surprise have the potential to go on well beyond an monetary recovery. In this particular phase in our research, we travelled beyond studying the common spending, self-reliance and self-health strategies that are becoming common place in the current environment and reviewed how economic stresses have driven different kinds of consumers--by income level, home composition and even differing consumer mindsets--to change their strategies.

Gidwan, Sunil and Desai, Jignesh, October, 2010, "New Direct Tax Code: Impact on Banking sector", THE ANALYST. Based on the writer, The DTC is a good step taken by the Government of India to reduce litigations and simplify the tax provisions followed for practically five ages. The bank sector performs a essential role in the economic development of any country. In India, the financial service sector is now acknowledged as the next growth engine. It is therefore critical that fiscal guidelines acknowledge this role and through various options support and strengthen the sector. Regardless of the representation made on behalf of the financial service sector following the first draft of the Direct Tax Code (DTC), the new DTC does not seem to handle some of the problems encountered by the bank sector. India has a much better banking system set up, when compared with the other developing countries, but there are several conditions that have to be addressed to be able to ensure these issues do not remain as hurdles in the continual economic development of the country. . A number of stringent proposals were brought in the draft Direct Taxes Code, 2009. There have been several regions of concern. Many of them, such as asset-based Minimum amount Alternate Tax (MAT) and treaty override, were addressed by the Fund Minister through the discharge of a Revised Discussion paper earlier in June this year

SOURCE OF DATA:

The way to obtain data that I have used is SECONDARY SOURCE DATA. Extra data is elected in form of information which includes already been accumulated by someone. Along with this some home elevators direct tax, their features are accumulated from internet.

For more info regarding research strategy, books from collection have been referenced.

ANALYSIS WITH THE TOPIC

The direct taxes and the buyer equilibrium has a direct relationship with each other. The direct duty code slabs impact the consumer in lots of ways and it's not merely only direct taxes that comes with an impact on the consumer equilibrium there are many other things that benefit consumer equilibrium. Once the direct tax that happen to be implemented on the individual are low, i. e. , the speed of tax that a consumer has to pay is minimal, it provides him the larger window to earn much more money as less overall will be deducted from his profits. Because of this the budget type of the buyer will show the deviation, it will move towards right side

INDIFFERENCE CURVE

EQUILIBRIUM POINT

BUDGET LINE

QTY OF A

QTY OF B

Fig a:High direct taxes Figb: Low direct tax

As we can easily see the above number depicts if the direct tax that the average person must pay are lowered than there will be the upwards shiftment of the budget line which will allow the consumer to buy more products by increasing his budgets. Indifference curve in the number plays an important role, indifference curve should be tangential to the budget brand because it is the most maximum level of which the consumer might use his budget to get maximum satisfaction. The next conditions should be kept in mind for consumer equilibrium:

Consumer spends all the income in buying two commodities ;hence point of equilibrium will rest on budget series.

The point of equilibrium will be on the highest possible indifference curve that consumer can reach.

Slope of indifference curve should be add up to the slope of budget line. In other words:

MUm/MUn = Pm/Pn

There are also some major factors that has influence on consumer equilibrium, which are as under:

Price effect

Income effect

Substitution effect

Price Result:

Change in the price tag on the the goods he uses will also lead to improve the equilibrium point. Price impact shows the reaction of consumer to the change in the price tag on a commodity, other things staying the same. It steps the change in amount (quantity) demanded of any product with change in it's price when price of the other item with which it has been blended remains the same.

When there is certainly increase in the price of a commodity, clearly he uses it less (and becomes worse off). And when the price tag on the commodity lessens or comes, he uses the commodity more (and becomes better off). Staying the intake of a item in the mixture same, it is clear that when the price of commodity (another in combination) raises, consumer shifts to the low indifference curve, and when price comes, consumer goes to higher indifference curve.

When the price tag on a product in X-axis raises (remaining the price of commodity on Y axis same, consumer will reduce the consumption of product in X - axis. Budget lines shifts downward. After upsurge in the price tag on good in X - axis, his budget series moves down wards. He provides the new equilibrium point at which it is leaner. This is in case there is rise in price of a commodity. Price Utilization Curve may be upward sloping, downward sloping (or backward sloping). Dynamics of slope of PCC shows the types of goods and their mix elasticity of two goods. Slope PCC is dependent on the nature of goods if they are poor, superior, luxurious or whether the combination is matches or substitutes.

Income effect:

When you can find change in income of consumer, there is change in equilibrium point credited to change in amount demanded; when there may be change in income, there may be change in budget collection. Generally income and quantity demanded romantic relationship is positive. Nonetheless it depends on the type of goods whether it is substandard or normal. If good is griffin paradox or substandard, income demand marriage is negative. A series joining equilibrium tips which are placed due to improve in income is income utilization curve.

When there may be upsurge in income, number demanded of both goods raises. PL is the initial budget range or price lines. When income of consumer decreases from PL to PL1, consumer consumes both the commodities less and Equilibrium E1 is set on new budget brand P1L1 and in lower Indifference Curve IC1. However when there is increase in income of consumer, his budget series shifts upwards to the from the foundation (P2L2). During upsurge in income, consumer consumes both the commodities more and equilibrium is set at point E2 on higher IC on budget lines P2L2. Both commodities in X and Y axis are normal goods so ICC is sloping upward.

E2

E1

P2L2

PL

P1L1

PL1

Substitution Effect:

Substitution result is also one of the sensible factor to cause change in consumers' equilibrium. Substitution result is the consequence of consumers inherent propensity to substitute cheaper goods for the relatively expensive ones. Substitution effect means the change in the purchase of a product because of change in comparative price exclusively, real income left over the constant. When price of an good changes, the real income (or purchasing electric power) of the buyer is also altered. To maintain real income of the consumer constant so that the effect due to improve in comparative price may be known, price change is compensated by simultaneous change in income.

For example when the price tag on good X falls, real of consumer raises. To find the substitution effect (i. e change in demand of X credited to change in its comparative price), we reduce the money income of consumer (to cancel the upsurge in real income anticipated to fall in price of X). For even more review of substitution, two slightly different ideas have been developed. Theory developed by Hicks and Allen is named Hicks Substitution Impact and theory developed by E. Slutsky is known as Slutsky Substitution Effect

MERITS/DEMERITS OF DIRECT TAX

MERITS OF DIRECT TAXES

Direct taxes are the main income resources of government.

These fees are easy to analyze on income and wealth of individuals and businesses.

Direct taxes funding government affairs to run smoothly.

These fees help government to begin and continue general population welfare operations

DEMERITS OF DIRECT TAX

The execution or direct taxes is a tough job as people are repellent and show incorrect assessment of these income and avoid tax payment.

Direct tax has the negative impact of specific income and decrease the amount of disposable income.

The collection is difficult as compare to indirect taxes where consumer do not feel a direct burden of tax.

Cost of assortment of direct tax is higher than indirect taxes.

Change in the pace and design is also problematic for direct taxes as compare to indirect taxes

More than 7 000 students trust us to do their work
90% of customers place more than 5 orders with us
Special price $5 /page
PLACE AN ORDER
Check the price
for your assignment
FREE