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    Question

    Value Added Tax (VAT) is an example

    of:
    A A direct, progressive tax. Correct Answer Incorrect Answer
    B A direct, proportional tax. Correct Answer Incorrect Answer
    C An indirect, regressive tax. Correct Answer Incorrect Answer
    D An indirect, progressive tax. Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    VAT is an indirect tax levied on consumption. Since lower-income households spend a larger proportion of their income, the tax consumes a higher percentage of their income, making it regressive in effect.

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