The ability-to-pay principle of taxation suggests that if a tax system is to be vertically equitable it should be ?
Correct answer: B. progressive
- A. efficient
- B. progressive
- C. regressive
- D. proportional
Explanation
Vertical equity requires taxpayers with greater ability to pay to bear a greater tax burden, which is usually represented by a progressive tax system. A progressive rate rises as income rises.
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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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