Taxation

Question 1

What is a progressive tax

Answer 1

Progressive tax is where those who are on higher incomes pay a higher marginal
rate of tax; they pay a higher percentage of their income on tax.Direct taxes tend to
be progressive

Example:
Income tax
Corporate

Question 2

What is a regressive tax

Answer 2

Regressive tax is where the proportion of income paid in tax falls as the income of
the taxpayer rises. Those on higher incomes pay a smaller percentage of their
income on the tax.

Example:
VAT

Question 3

Go on sketchpad and draw the Laffer Curve

Answer 3

Did you remember:
-Tax revenue on the y axis
- Tax rate (%)
- Inverted U shape
- Optimum tax rate at T