Tax system and the equity of a tax system.

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Chapter 12.3, Problem 3QQ

To determine

Tax system and the equity of a tax system.

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1. Though the tax structure (i.e., the tax base and rates) has much to do with the equity effects of taxation, its administration could also strengthen or weaken its fairness. If the tax administrator practices discretion in the grant of deductions, there is a. Regressive equity b. Progressive equity c. Vertical equity d. Horizontal equity 2. The potential of the income tax as a tool to enhance the equity of the tax system brings to the fore the importance of designing the scheme of income taxation in accordance with acceptable norms and principles such as allocating costs or burdens to the people. This is known as the: a. Non-compensation or set-off b. The Lifeblood Doctrine c. Marshall doctrine d. Ability to pay approach3. An egalitarian society normally is prejudiced towards a tax system which puts a heavier burden on those who have the greater ability to pay. An equitable tax is taken as one which promotes the unequal tax treatment of unequals. The tax must be so…

1. Explain whether the Coase theorem is useful in practice. 2. Define vertical and horizontal equity objectives of a tax system. Which one do you think is more important in establishing equity and/or fairness?

Which principle states that taxes should be levied according to a taxpayer’s ability to pay?a) Benefit principleb) Horizontal equityc) Vertical equityd) Ability-to-pay principle