Multiple choice

Which of the following taxes is based on the principle of equity?

  1. Progressive Tax

  2. Proportional Tax

  3. Regressive Tax

  4. None of these
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A Correct answer
Explanation

Progressive tax is based on principle of equity. In the progressive tax, the rate of tax increases as the income of tax payer increases. Hence, the rich people are taxed at higher rates than the poor people. Therefore, the rich people pay more, and the revenue collected is used for the welfare of the poor. Thus, progressive tax is based on principle of equity.

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