Question on: JAMB Economics - 2015
Mr. Patrick’s income is N900 while that of Mr. Shodawe is N1,300. if Mr. Patrick and Shodawe pay N90 and N130 as taxes, the tax system is
A
Direct
B
Progressive
C
Regressive
D
Proportional
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Correct Option: B
A tax system is considered:
* **Proportional:** When the percentage of income paid as tax remains constant as income increases.
* **Progressive:** When the percentage of income paid as tax increases as income increases.
* **Regressive:** When the percentage of income paid as tax decreases as income increases.
In this case:
* Mr. Patrick's tax rate: (N90 / N900) \* 100% = 10%
* Mr. Shodawe's tax rate: (N130 / N1300) \* 100% = 10%
Since both individuals pay the same percentage of their income as tax, the tax system is proportional.
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