Question

argument for and against taxation of services-Ramsey rule could be invoked here

Answer 1

As per Ramsey rule of taxation, the taxation of two commodities should be set in such a way that the marginal dead weight loss is equal to the marginal revenue.

Ramsey taxation could bring about an egalitarian distribution of goods. By taxing services at an optimal rate in order to bring more tax compliance and reduce tax evasion

However, Ramsey rule also advocates that all services taxed at same rate would bring about a distortion. For instance, necessary services like education would taxes at the same rate as financial services. This would result in the loss of consumer welfare.