Econ Questions(tax)

2008-03-22 12:33 am

1)Under what situation will more people fall into the tax net?
2) 03 CE MC39
Q: Suppose the salaries tax allowance in HK decreases and the salaries of taxpayers remain unchanged. It results that...
Ans: B)the middle-income group would have to pay a larger proportion of their income as tax.
C) the after-tax income of taxpayers would decrease.
Why the ANS is B but not C??
Thank you very much~

回答 (1)

Gabriella Montez

2008-03-22 12:47 am

✔ 最佳答案

1) When the tax allowance decreases, more people will fall into the tax net.
2) Taxable income = Total income - tax allowance
A decrease in tax allowance leads to an increase in taxable income.
Thus more people will fall into the tax net and existing taxpayers who are taxed at progressive rate will then need to pay more taxes.
However, it is not true to all taxpayers. For those who are taxed at standard rate, the amount of salaries tax allowance is not applicable for calculation of salaries tax.
Therefore even salaries remain unchanged, not all tax payers will suffer from a decrease in after - tax income.
Hence the answer is B.

參考: My Econ Knowledge

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