Multiple choice

Which of the following fulfills the criterion of horizontal and vertical equity in taxation?

  1. Expediency Approach

  2. Ability-to-pay Approach

  3. Benefit Approach

  4. Socio-Political Approach
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The ability-to-pay approach to taxation fulfills both horizontal equity (equals should be taxed equally) and vertical equity (unequals should be taxed unequally). This principle states that those with greater ability to pay (higher income/wealth) should bear a larger tax burden. The benefit approach taxes based on benefits received, while expediency and socio-political approaches don't systematically address equity.

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