Question

Why are indirect taxes termed as regressive taxing mechanisms?

• A. They are charged at higher rates than direct taxes
• B. They are charged the same for all income groups
• C. They are charged differently for all income groups
• D. They are charged at lower rates than direct taxes
• E. None of the above

Answer 1

The correct option is B They are charged the same for all income groups

The indirect taxes like VAT etc are paid by everyone if they buy any product irrespective of financial conditions. Direct taxing is considered the most progressive taxing mechanisms because they justify the income levels of the people.