Question
Consider the income tax schedule follows the structure below: Income Slab PIT Rate (%) 0 to 20000 0 20001 to 30000 10 30001 to 40000
Consider the income tax schedule follows the structure below:
Income Slab | PIT Rate (%) |
0 to 20000 | 0 |
20001 to 30000 | 10 |
30001 to 40000 | 20 |
Above then 40000 | 25 |
A. Calculate the marginal and average tax rate. Do you think that this tax structure is appropriate to ensure the equity? Explain your answer. B. Do you agree that Ramsey model of optimal taxation will work in this example? Explain your answer by using the diagram. C. If tax structure will be proportionate at 10%. Do you think that tax incidence would increase for the tax payers? Explain by using this example. D. Explain the condition of the regressive tax structure. Why the regressive tax structure is not ideal tax structure? Give your justification.
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