Solution:The ability to pay principle states that the amount of tax an individual pays should be dependent on the level of burden the tax will create relative to the wealth of the individual.
The Benefit principle recognises that the purpose of taxation is to pay for government services. If taxes are imposed according to the benefit principle, people pay taxes in proportion to the benefits they receive from government spending.
Indirect taxes are tax levied on goods and services rather than on income or profits. The advantages of indirect taxes are that they are cheaper and easier to collect.
Hence, statement 1, 2 and 4 are correct. A progressive tax imposes a higher rate on the wealthy than on the poor. It’s based on the taxpayer’s ability to pay. Hence, statement 3 is incorrect.