Taxes

Question 1

Direct Taxation

Answer 1

a tax levied directly on an individual or organisation

ex: income tax

Question 2

Indirect Taxation

Answer 2

a tax levied on goods or services. It is a tax imposed upon expenditure and is placed on the selling price of the product therefore shifting the firms supply curve vertically upwards by the amount of tax imposed.
ex: value tax or excise duties

Question 3

Progressive Taxation

Answer 3

taxes where the proportion of income paid in tax rises as income rises.
ex: the American federal income tax

Question 4

Regressive Taxation

Answer 4

taxes where the proportion of income paid in tax falls as income rises.
ex: If a person has $10 of income and must pay $1 of tax on a package of cigarettes, this represents 10% of the person’s income. However, if the person has $20 of income, this $1 tax only represents 5% of that person’s income.

Question 5

Proportional Taxation

Answer 5

taxes where the proportion of income paid in tax remains the same as income rises.
ex: Hungary has a flat income tax of 16%