Advantages Of Free Trade

Business , Marketing
Main benefits or advantages of free trade can be highlighted as follows:

1. Higher Efficiency

Under free trade, domestic firms have to compete with large foreign producers. So, domestic companies try to increase their efficiency by effectively utilizing the resources.

2. Promotes Specialization

Under free trade, every countries try to produce goods as per their comparative advantage. So, it promotes specialization and division of labor to earn higher return.

3. Reasonable Price

Due to free competition, free trade facilitates wide range of quality products at lower and reasonable price.
advantages of free trade
4. Gain Of Technology

Free trade helps to gain latest technology and modern machinery from foreign countries. It helps in the industrial development of the state.

5. Gain Of Capital

Huge amount of capital can be attracted in the country because of barrier free trade. It helps the economic development of the country.

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6. Employment Opportunities

Free trade brings capital and technology to promote industrialization in the country. Industrialization creates employment opportunity.

7. Market Expansion

Free trade helps to expand the size of production and market because domestic products can be easily sold in the international market without any barrier.

8. Restrict Market Exploitation

It restricts market exploitation and monopoly of domestic companies.
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Disadvantages Of Protectionism

Business , Marketing
Major drawbacks or disadvantages of trade protectionism can be expressed as follows:

1. High Price For Low Quality

Because of trade protectionism, domestic producers can raise the price of their products and services without maintaining the quality. Due to the lack of competition, produces focus only on profit rather than quality.

2. Limited Choice To The Consumers

Barrier in trade restricts foreign products which limits the range of goods and services in the market. So, consumers have to be satisfied with with limited number products and services.
disadvantages of protectionism
3. Idleness In Domestic Industries

In the absence of free competition, domestic industries may become idle. They may not try to improve quality, technology and management as per the requirement and consumers' choice.

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4. Situation Of Monopoly

There will be a high chance of monopoly in the market because of protectionism.

5. Inefficient Resource Allocation

Trade protectionism discourages specialization and innovation. It results in inefficient allocation of resources.
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Disadvantages Of Indirect Taxes

Accounting , Business
Major drawbacks or disadvantages of indirect taxes are as follows:

1. Unfair/Regressive

Both rich and poor people have to pay same amount of tax because taxes are included in the price of the products and services. So, poor people have to may more amount of their income as tax. So, indirect taxes are regressive and unfair in nature.

2. No Civic-consciousness 

Tax payer does not feel the burden of taxes as they are wrapped in the purchase price. So, it lacks civic-consciousness. 

3. Restrict Free Trade

Free trade may be restricted due to high export and import duties.

Higher tax rate increases the price of the products which may lead to inflation.

5. Harmful To Industries

Cost of production will be high if raw materials and machinery are highly taxed. It reduces the competitive capacity of industries.

6. Burden For Poor People

Indirect taxes reduce the saving capacity of poor people. So, these taxes are not suitable for households and low-income groups.
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Advantages Of Indirect Taxes

Accounting , Business
Major benefits or advantages of indirect taxes can be pointed as follows:

1. Convenient To Pay

Indirect taxes are imposed while purchasing goods or services. Taxes are already added in the price of the product. So, the 'Pre-coated' tax makes convenience to both the tax payer and the administration.

2. Broad Based

Since tax is wrapped up in the price of goods and services they are imposed on all people (i.e rich, poor, young, old etc.). So, indirect taxes have wider scope than direct taxes.

3. Economical

These taxes are easy to collect. It takes less effort, less time and less cost to collect tax. So, indirect taxes are economical in nature.
advantages indirect taxes

4. Flexibility

Indirect taxes are more flexible than direct taxes. Tax rates can be easily changed by the authority as per the nation's requirement.

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5. No Tax Evasion

As we know that taxes are included in the purchase price of the product, there is no chance of tax evasion.

6. Limits Harmful Consumption

Harmful products such as tobacco, alcohol and intoxicants are heavily taxed by the state. It helps to limit the consumption of such products.
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Disadvantages Of Direct Taxes

Accounting , Business
Major drawbacks or disadvantages of direct tax can be pointed out as follows:

1. Chance Of Evasion

There is high chance of tax evasion. It is very easy for the people to evade tax by submitting false income report. Corrupted administration also plays significant role in tax evasion.

2. Inconvenience

It is inconvenient for the taxpayer to follow different process and filling different forms to pay tax. It is also inconvenient to make proper record of payment.

3. Discourage Investment

Higher tax rate reduce the saving capacity of the people. Low saving affects investment capacity. So, direct taxes adversely affect the capital formation.

              disadvantages direct taxes

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4. Reduce Motivation

High tax rate demotivates people to work hard and make more money. It hampers their ability and effectiveness at work.

5. Discourage Entrepreneurs

Entrepreneurs are discouraged to commence business because of direct taxes. It negatively impacts nation's business environment. 
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Advantages Of Direct Taxes

Accounting , Business
Merits or advantages of direct tax can be expressed as follows:

1. Simple To Estimate

One notable advantage of direct tax is its simplicity. Direct taxes are very simple to estimate and easy to understand. Tax amount can be calculated without any complication.

2. Ensures Fairness

Fairness is another benefit of direct taxes. Higher tax rate is imposed for high income groups and lower for lower income people. So, it ensures fairness, equality and justice according to the level of income.

3. Transparency/Certainty

Direct taxes are transparent in nature. Both tax payers and receivers (government authority) are certain about the rate and amount of tax to be paid.
advantages direct taxes

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4. Less Costly

Generally taxes are collected at the source which saves both time and money. So, direct taxes are economical in nature.


5. Elastic 

Tax rates can be increased or decreased by the government as per the need of the country. So, direct taxes are elastic in nature.

6. Revenue For Government

Direct tax is a major source of government revenue. It is highly productive and very important for economic development. 
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