A tax system is regarded as horizontally equitable if ?
Correct answer: E. taxpayers with similar abilities to pay taxes pay the same amount
- A. all taxpayers pay the same amount of tax
- B. taxes on all goods are levied at the same rate
- C. taxes are as low as possible
- D. the system comprises only lump sum taxes
- E. taxpayers with similar abilities to pay taxes pay the same amount
Explanation
Horizontal equity means treating taxpayers with equal ability to pay equally. It does not require everyone to pay the same absolute amount, since taxpayers may have different abilities to pay.
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About Public Finance
Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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