Answer to Question #241297 in Macroeconomics for mnb

Question

Indicate whether the following statements are true or false and provide a reason for each answer:

1. When the Minister of Finance annually increases sin taxes, it is an example of a unit tax.
2. Taxes on companies’ accounting profit will not lead to an excess burden on them.
3. A broad- based VAT is a regressive tax that will affect the higher incomes earners more, as they buy more goods and services
4. Public debt management has only the minimisation of debt servicing cost as a goal.

Answer 1

1. When the Minister of Finance annually increases sin taxes, it is an example of a unit tax. It's true because sin tax is an excise tax which is imposed on each item sold. A unit tax is fixed tax of fixed amount for each unit of gold sold. Excise duty which is a sin tax falls under this category.
2. Taxes on companies’ accounting profit will not lead to an excess burden on them.False because stakeholders are the ones that that bear the cost of corporate tax and the company is part of that.
3. A broad- based VAT is a regressive tax that will affect the higher incomes earners more, as they buy more goods and services. False because poorer households spend more on consumption thus incurring a larger VAT.
4. Public debt management has only the minimisation of debt servicing cost as a goal. True because the main goal of PDM is to minimise cost of borrowing over the long term while raising borrowings of the government