ICAB CL Principles Of Taxation Practice Questions - ICAB CA Certificate Level Principles Of Taxation (Bangladesh) Exam

In tax policy, what is the key difference between horizontal equity and vertical equity?

Horizontal equity requires taxing different income sources differently, while vertical equity taxes all sources equally Horizontal equity requires individuals with equal ability to pay to pay equal taxes, while vertical equity requires individuals with greater ability to pay to pay more taxes Horizontal equity applies only to direct taxes, while vertical equity applies only to indirect taxes Horizontal equity refers to taxing corporations, while vertical equity refers to taxing individual employees

Correct Answer:

Horizontal equity requires individuals with equal ability to pay to pay equal taxes, while vertical equity requires individuals with greater ability to pay to pay more taxes

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