If Mr. A earns N2.000 a year while Mr. B earns N8000 but Mr. A pays N200 in tax per annum while Mr. B pays N400, such tax is_______
- Progressive
- Proportional
- Indirect
-
Regressive
The correct answer is: D
Explanation
A regressive tax is a tax that takes a larger percentage of income from low-income groups than from high-income groups.
From the illustration in the question, Mr. A is charged 10% for tax per annum (ie, 0.1 x 2000 = 200) while Mr. B who earns higher than Mr. A is charged 5% (ie, 0.05 x 8000 = 400)
This means the taxing system is regressive, where a low-income earner, is paying a higher percentage of their income as tax while someone who earns more than double that amount is charged a lesser percentage.