"We should not have a tax system which encourages investment in particular assets or in specific areas of the country." This statement reflects which of the following qualitative characteristics of an effective tax system?
A)Neutrality.
B)Horizontal equity.
C)Simplicity.
D)Elasticity.

Question

Quizplus · Accepted Answer

This statement reflects the qualitative characteristic of neutrality, which means that the tax system should not favor or discriminate against certain economic activities, products or regions. A neutral tax system would not encourage or discourage investment in any particular assets or areas of the country, leaving the market forces to allocate resources efficiently.

"We Should Not Have a Tax System Which Encourages Investment