Question

Distinguish between Regressive tax and degressive tax

Answer 1

Regressive tax and degressive tax: In regressive tax, the average tax rate decreases with an increase in the income of an individual. The absolute amount of tax collection increases with an increase in the income. On the other hand, degressive tax means the rate of tax increases up to a certain limit after which a uniform rate is charged. This system is a mixture of proportional tax and progressive tax. The absolute amount of tax collection falls with an increase in the income.