Taxation

Question 1

Progressive tax

Answer 1

Marginal rate of tax rises as income rises

Question 2

Proportional tax

Answer 2

Marginal rate of tax is constant leaving to a constant average rate of tac

Question 3

Regressive tax

Answer 3

Rate of tax paid falls as income rises. Takes up less of higher income consumers

Question 4

Direct tax

Answer 4

Levied directly on individuals and companies

Question 5

Indirect tax

Answer 5

Levied on goods and services

Question 6

What a good tax system should entail

Answer 6

Low cost of collection
Timing and amount of collection should be clear and certain
Convenient to tax payer

Question 7

Laffer curve

Answer 7

Where there is an optimum tax rate. If too high people stop working. Brain drain- higher skilled workers move abroad. Incentive to evade tax

Question 8

Evaluation of laffer curve

Answer 8

Many on fixed hour/ zero hour contact so tax has small effect on incentive
Tax rates not really inventive depends on benefits