The difference between a value-added tax and a flat tax is
The difference between a value-added tax and a flat tax is
a. a value-added tax is progressive, while a flat tax is proportional,
b. a value-added tax is vertically equitable, while a flat tax is horizontally equitable.
c. a value-added tax satisfies the ability-to-pay principle, while a flat tax satisfies the benefits principle.
d. There is essentially no difference between a value-added tax and a flat tax
Homework Answers
Answer: ( A)
Value-added tax is imposed on the value created, this is regarded as progressive tax while the flat tax is imposed equally on all. Thus it is the proportional tax.
ANSWER :
Option b.
Explanation :
Flat tax is a fixed percentage of tax on income irrespective of the level of income. Hence it is proportional tax or horizontally equitable.
Value-added tax is also a flat tax but levied on the goods and services for the value added at every point of sale. Hence, it is vertically equitable.
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