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 EarnersIncome Base
tax
Payments
N
N
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 x 100 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 taxationColumn 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 - taxation or 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
