The table below shows the tax payments of four income earners in a year. Use...
The table below shows the tax payments of four income earners in a year. Use the information in the table to answer the questions that follow.
| Income Earners | Income Base | tax | Payments |
| A | B | ||
| Jawara | 15,000.00 | 1,500.00 | 1,200.00 |
| Ade | 25,000.00 | 2,000.00 | 2,000.00 |
| Eke | 32,000.00 | 3,200.00 | 2,240.00 |
| Audu | 60,000.00 | 6,000.00 | 3,000.00 |
(a) Determine the percentage rate of taxation paid by
(i) Jawara in columns A and B.
(ii) Audu in columns A and B.
(iii) Ade in columns B.
(iv) Eke in column B
(b)(i) Identify the systems of taxation employed in columns A and B.
(ii) Which of the income earners have the least burden under column B?
(c) (i) If government increases its rate of taxation to 15% flat rate, how much revenue will be generated from the payees?
(ii) At 15% flat rate taxation, calculate the disposable incomes of Messrs Jawara, Ade, Eke and Audu.
Explanation
(a)(i) Tax rate =Tax payment x100 for A
tax base 1
For Jawara = 1,500 x 100 = 10%
15,000 1
(ii) Audu= \(\frac{6000*100} {60,000 *1}\) = 10% for A
\(\frac{3000*100} {60,000*1}\) = 5% for B
(iii) Ade = \(\frac{200*100} {25,000*1}\) = 8%
(iv) Eke \(\frac{2240*100} {32,000*1}\) = 7%
(b) (i) Column A- Proportional system of taxation
Column B - Regressive system of taxation.
(ii) Audu
(c) (i) Jawara= \(\frac{15 x 15000} {100 *1}\) = 2,250.00
Ade = \(\frac{15 x 25,000} {100*1}\) .= 3,750.00
Eke = \(\frac{15 x 32000} {100 *1}\) = 4,800.00
Audu \(\frac{15 x 60,000} {100*1}\) = 9,000.00
Total Revenue = 19,800.00 or 15% of total Income =
15 x 132,000
100
= 19,800.00
Disposal income = income - taxationor Tax base - tax paid
Jawara = 15,000 - 2,250 = 12,750.00
Ade = 25,000 - 3, 750.00 = 21,250.00
Eke = 32,000 - 4,800.00 = 27,200.00
Audu = 60,000 - 9,000 = 51,000.00