Economics 3 Marks Question

Tax revenue collection by the government may be categorized as:

• Direct Taxes: It refers to those taxes whose impact and incidence lie on the same entity. In other words, the liability of paying direct taxes can’t be shifted.
  
• Indirect Taxes: It refers to those taxes whose impact and incidence may lie on different entities. In other words, the liability of paying indirect taxes can be shifted. 

Steps pertaining to the estimation of National Income under the Income method:
1. Identify and classify production units into distinct heads namely primary, secondary, and tertiary sector.
2. Estimate and classify the factor payments in different categories as Compensation of Employees, Operating Surplus, and Mixed Income. The sum of factor payments represents the contribution of the sectors to Domestic Income (NDPFC).
3. Finally, estimate and add the value of Net Factor Income from Abroad (NFIA) to arrive at National Income (NNPFC).