WAEC Economics 2018 Theory — Question 8

Model answer

(a) A tax is a compulsory levy imposed by the government on individuals, corporate bodies, goods and services. (b)(i) Progressive tax: a tax in which the amount paid, or rate of tax paid, increases as income increases. (ii) Proportional tax: a tax system in which the rate paid as tax is the same regardless of income level. (iii) Regressive tax: a tax system in which the rate paid as tax decreases as income increases. (c)(i) Equity: this principle states that taxes collected from people of the same category should be the same, and should be based on each person's ability to pay. (ii) Convenience: this principle states that taxes should be collected at the time and in the manner that is most convenient for the taxpayer. (iii) Economy: this principle states that the cost of collecting a tax should not be excessive compared to the amount that will be realised from that tax.