Merits of Direct Taxes: 

(i) Equity: 

1. Direct taxes are progressive i.e. rate of tax varies according to tax base. 

2. For example, income tax satisfies the canon of equity .

(ii) Certainty: 

1. Canon of certainty can be ensured by direct taxes. 

2. For example, an income tax payer knows when and at what rate he has to pay income tax.

(iii) Elasticity: 

1. Direct taxes also satisfy the canon of elasticity. 

2. Income tax is income elastic in nature. As income level increases, the tax revenue to the Government also increases automatically.

(iV) Economy:

1. The cost of collection of direct taxes is relatively low.

2. The tax payers pay the tax directly to the state.

Merits of Indirect Taxes:

(i) Wider Coverage:

1. All the consumers, whether they are rich or poor, have to pay indirect taxes. 

2. For this reason, it is said that indirect taxes can cover more people than direct taxes. 

3. For example, in India everybody pays indirect tax as against just 2 percent paying income tax.

(ii) Equitable: The indirect tax satisfies the canon of equity when higher tax is imposed on luxuries used by rich people.

(iii) Economical: 

1. Cost of collection is less as producers and retailers collect tax and pay to the Government. 

2. The traders act as honorary tax collectors.

(iv) Checks harmful consumption: 

1. The Government imposes indirect taxes on those commodities which are harmful to health e.g. tobacco, liquor etc. 

2. They are known as sin taxes.

(v) Convenient: 

1. Indirect taxes are levied on commodities and services. 

2. Whenever consumers make purchase, they pay tax along with the price. 

3. They do not feel the pinch of paying tax.