Topics: Tax, Income tax, Progressive tax Pages: 4 (1237 words) Published: March 17, 2014
5.2 Tax systems
6(a) Distinguish with the use of examples between
(i) Direct and indirect taxes [3]
(ii) Progressive and regressive taxes [3]
(a) 3 marks for each pair. (Examples of each pair, 1 mark.) [6] 考生分析:
In part (i), most candidates were able to distinguish between direct and indirect taxation in terms of the former being a tax on income and the latter a tax on expenditure. Appropriate examples of the two types of taxation were given, such as income tax as an example of a direct tax and value added tax (or any other kind of sales tax) as an example of an indirect tax. A few candidates,unfortunately, got the two types of tax completely mixed up. In part (ii), many candidates understood the meaning of a progressive tax, explaining how the income tax rates would be higher for greater levels of income, but there was a great deal of confusion over a regressive tax, such as a sales tax. It is not that the rate of tax changes, but that it takes up a higher proportion of the income of poor people compared to the better-off.

6(c) Discuss what might happen in an economy if a government increases income tax rates. [8] 参考答案:
Effect on prices, growth, employment, exports, imports, migration, incentives, government revenue\ and spending, saving and investment. Identification alone up to 4 marks. [8] 考生分析:
There were a number of reasonably good answers to this part of the question. Candidates considered the likely positive effects, such as the increased revenue that could then be spent on the people, such as an improvement in the education and health provision, the effect on controlling the rate of inflation and the fairer distribution of income that would be a likely consequence. Many of them then went on to discuss the likely negative effects, such as the disincentive to work resulting from the higher rates of income tax that would be paid, reducing the net income.

5(a) Describe the difference between a progressive and a...
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