Vertical equity holds that ?
Correct answer: D. those with greater ability to pay should pay more
- A. those will equal ability to pay should bear equal tax burdens.
- B. those who benefit the most from government service should bear the higher tax burden
- C. those with equal ability to pay should bear unequal burdens
- D. those with greater ability to pay should pay more
Explanation
Vertical equity compares taxpayers with different abilities to pay and requires those with greater ability to pay to bear a larger tax burden. Equal ability to pay bearing equal burdens describes horizontal equity.
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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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