Answer to Question #93850 in Macroeconomics for Nomthandazo

Question

Which of the following statement regarding taxation is/are correct:

a. a neutral tax leaves the same tax burden on all the tax payers

b. exclusion is highly impossible in the case of public goods

c. tax avoidance occurs when people illegally do not pay the taxes due by them

Answer 1

The answer is: A.

important notes:

• Neutral tax leaves the same tax burden , does not depend on any circumstances and cannot be avoided.
• For many public goods, potential users can be excluded from consumption, if they are not willing to pay the user charge or user fee. Examples for such excludable public goods include highways, schools, universities, national parks and television programs.
• Tax avoidance is the use of legal methods to modify an individual's financial situation to lower the amount of income tax owed. ... This practice differs from tax evasion which uses illegal methods, such as underreporting income, to avoid paying taxes.

https://www.thebalancesmb.com/tax-avoidance-vs-evasion-397671

https://www.investopedia.com/terms/t/tax_avoidance.asp