Pearson Edexcel A Level · Economics A (9EC0)
5 multiple-choice questions marked as you go, and 3 written questions with worked solutions. All on Taxation.
An individual earns \(£20,000\) and pays \(£2,000\) in income tax. After a promotion, their income rises to \(£40,000\) and they pay \(£10,000\) in income tax. Which of the following best describes this tax system over this income range?
According to the Laffer curve, if a government reduces the top marginal rate of income tax from \(90\%\) to \(70\%\), which of the following is a possible outcome regarding tax revenue?
A country implements a proportional tax system where all individuals pay the same percentage of their income in tax. If an individual earns \(£20,000\) and pays \(£4,000\) in tax, and another individual earns \(£100,000\), how much tax will the second individual pay, and what is the marginal rate of tax?
Which of the following identifies a direct tax and its most likely impact on the incentives to work?
Which of the following is a potential negative supply-side effect of a significant increase in the rate of capital gains tax?
Using the concept of the Laffer curve, explain why an increase in the top rate of income tax from 45% to 50% might lead to a decrease in total tax revenue.
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A government increases the rate of corporation tax to increase revenue but ignores the potential for transnational companies (TNCs) to use transfer pricing. Discuss how this interaction might lead to a lower-than-expected tax yield and impact the country's international competitiveness.
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Analyze why a progressive tax system is generally preferred over a regressive tax system when a government's primary macroeconomic objective is to reduce income inequality.
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