Taxation

VISHNU MANOHARAN
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PROPORTIONAL, PROGRESSIVE, REGRESSIVE
AND DEGRESSINVE TAX SYSTEM

The ability to pay taxes can be accurately measured with net income, it may be considered as an appropriate basis for allocation of the Tax burden between different section of the society. Direct Taxes therefore are classified distribution of their burden on the Tax payers. According to this classification taxes may be classified into four different categories.

I. PROPOTIONAL TAX SYSTEM
This implies that the rates of taxation should be same regardless the sixe of the Income. In this system in which the Tax rates of Taxation remains constant as the Tax base changes. It can be defined as follows. “The Amount of Tax payable is calculated by multiplying the Tax base with rate of Tax.
Tax Payable       =       Tax Base     X   Tax Rate

Tax Base Tax Rate in % Amount of Tax in Rs
40,000 20% 8,000
60,000 20% 12,000
      1,20,000 20% 24,000
      1,50,000 20% 30,000

Therefore from the above table we can easily understand that the rate of Tax percentage is always constant or some. Eventhough the Income keeps on increasing. IN this system Income increases or Tax base increase with permanent percentage.
Merits of Proportional Tax System
1. It is simple in Nature
2. It is uniformly applicable
3. Proportional Taxation does not change the Economic status of the Tax Payer
4. It avoids the mistakes and draw backs of progressive Tax syste

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1.It is simple in Nature
Proportional Tax System is very simple a nd easy to understand. Even a person with ordinary intelligent can easily understand the Tax System without any difficulty.
2. It is uniformly applicable
The Tax System is uniformly spread or evenly spread to all the people without any difference. In this system whatever may be the Income but person always pays a uniform or fixed percentage of Tax because the rate is same for all.
3.This system does not change the Economic status of the Tax Payer because... [continues]

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