![]() ![]() An ideal flat tax system gives no tax deductions or exemptions to taxpayers. Generally, income generated from dividends, capital gains, distributions and others are not tax under the flat tax system.īack to : Accounting & Taxation How Does a Flat Tax Work?Ī flat tax system enhance more earning by taxpayers, especially those who have higher income because they are taxed equally as other taxpayers. ![]() An ideal flat tax system maintains a proportional and constant tax rate regardless of changes in the income of taxpayers. Tax deductions and tax exemptions are not allowed in a flat tax system. A flat tax system maintains equal tax rate on all taxpayers regardless of their income. An income tax system in which all individuals (taxpayers) pay the same tax amount without giving regard to the divergence of their income is a flat tax system.
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