Question

The principle of "Ability to Pay" in taxation is most closely associated with:

A Proportional taxation. Correct Answer Incorrect Answer
B Benefit principle. Correct Answer Incorrect Answer
C Horizontal and vertical equity. Correct Answer Incorrect Answer
D Tax simplicity. Correct Answer Incorrect Answer
E None of these Correct Answer Incorrect Answer

Solution

Horizontal equity (equal treatment of equals) and vertical equity (unequal treatment of unequals) are derived from the ability-to-pay principle. It suggests taxes should be levied according to an individual's capacity to bear the burden.

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