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Question

Distinguish between 'Regressive' tax and 'Degressive' tax.

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Solution


Regressive TaxDegressive Tax
1Regressive tax is one in which the
rate of taxation decreases as the taxpayer's income increases.
A tax is called Degressive when the rate of progression in taxation does not increase in the same proportion as the income increases.
2A regressive tax takes a smaller percentage of people's income the larger their income is. In this system, the rate of tax falls with increase in income.In this case, the rate of tax increases up to certain limit, after that a uniform rate is charged and become constant.

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