What does tax neutrality generally seek to achieve?
Correct answer: B. Minimal distortion of economic decisions
- A. The highest possible tax rate on income
- B. Minimal distortion of economic decisions
- C. Different tax rates for identical taxpayers
- D. Collection of tax only from imports
Explanation
Tax neutrality seeks to raise revenue without unnecessarily changing choices about production, consumption or investment. A tax can still influence behaviour, but neutrality aims to keep that distortion as small as practical.
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About Taxation
Taxation covers the principles used to assess and collect taxes from individuals, businesses and transactions, with emphasis on income tax and sales tax concepts in Pakistan. Questions involve taxable income, exemptions, deductions, tax liability, withholding, returns, assessment, tax avoidance versus evasion, and the distinction between direct and indirect taxes.
Practise Taxation
50 free Taxation MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
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