salim, mohammed and khalid are three individuals who come from the same background and are as fast friends. As normal individuals in an economy, they earn money and spend the same on leading good lives. They are tax payers of a country with annual income of 20000, 29000 and 34000 respectively. A standard assumption is that all the three individuals spend approximately 12000 on purchase of essentials. These essentials are subject to sales tax.

Based on the above case you are required to:

I) Calculate the tax being paid by each individual under a, b, c and d scenarios.

II) Comment in detail (using calculations from I) about features and effects of each of the given tax structures on individuals and on the economy.

III) Comment giving justification as to which tax structure (a, b or c) would be the most beneficial to a country.

TAX STRUCTURE

A) The country follows a flat tax rate of 18%

B) The country follows a tax rate as follows:

Up to 3499Nil

3500 79995 %

8000- 2099915%

21000 3299925%

Above 3300035%

C) The country follows a dual tax rate system as follows

Up to 1750012%

17500 and above18%

D) The Sales tax rate in the country is 11%.