Which statement describes a primary benefit of a PAYE system?

Which statement describes a primary benefit of a PAYE system?

• A. Payment frequency is annual
• B. Tax is collected at source, so taxpayers are less likely to default
• C. Tax authorities deal with individuals rather than employers
• D. All admin costs borne by government

Answer: (B)

In PAYE, tax is deducted from employees’ wages by the employer each pay period and remitted to the tax authority as income is earned. This means tax is collected at source, so the amount due is paid automatically and gradually rather than as a large lump sum at year-end. That reduces the chance of taxpayers defaulting or missing payments, since the obligation is settled through regular payroll deductions. It also gives the government a steady, predictable flow of revenue and simplifies timing for individuals, who don’t face a big annual bill. The other statements aren’t accurate reflections of PAYE: payment is not annual but aligned with payroll cycles; the tax authority typically engages with employers to collect tax on behalf of employees; and admin costs aren’t borne entirely by the government—the system involves employer responsibilities and shared costs.

In PAYE, tax is deducted from employees’ wages by the employer each pay period and remitted to the tax authority as income is earned. This means tax is collected at source, so the amount due is paid automatically and gradually rather than as a large lump sum at year-end. That reduces the chance of taxpayers defaulting or missing payments, since the obligation is settled through regular payroll deductions. It also gives the government a steady, predictable flow of revenue and simplifies timing for individuals, who don’t face a big annual bill. The other statements aren’t accurate reflections of PAYE: payment is not annual but aligned with payroll cycles; the tax authority typically engages with employers to collect tax on behalf of employees; and admin costs aren’t borne entirely by the government—the system involves employer responsibilities and shared costs.