Tag: public revenue and taxation

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Multiple choice social science tax and its importance taxation : need, principles and importance main feature of tax public revenue and taxation

An income tax system is said to be progressive ________________.

  1. if the rate of increase of the tax liability for a tax paying unit is less than the rate of increase of its income

  2. if the rate of increase of the tax liability for the tax paying unit is greater than the rate of increase of its income

  3. if the rate of increase of the tax liability for tax paying unit is equal to the rate of increase of its income

  4. if the rate of increase of the tax bears a multiplicative relation with rate of increase in income of tax paying unit
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B Correct answer
Explanation

A progressive tax system is defined by the tax rate increasing as the tax base (income) increases. This means the tax liability grows at a faster percentage rate than the income itself.