Multiple choice

Which of the following taxation systems results in the least collection of tax revenue in an economy?

  1. Progressive Tax

  2. Digressive Tax

  3. Regressive Tax

  4. Proportional Tax
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

It is regressive tax. In the regressive tax, the rate of tax charged decreases with the increase in income. Hence, those who earn high income pay less tax as compared to the poor. Thus through this, the tax collected is the least in an economy, as the rich can pay high amount at higher rates, which is not possible in this system. The poor even at high rates are unable to pay high amount of tax as they earn less income.

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