Question : Which of the following taxes is proportional in nature?
Option 1: Capital Gains Tax
Option 2: Income Tax
Option 3: Corporation Tax
Option 4: Goods and Services Tax
Correct Answer: Goods and Services Tax
Solution : The correct answer is Goods and Services Tax .
Indirect taxes are mostly "Proportional" in nature, which means that the tax is levied at a fixed rate as a percentage of the tax base, irrespective of the size of the tax base. On the other hand, direct taxes are progressive, which means that the tax rate increases as the taxable income increases. Goods and Services Tax is an example of a proportional tax since it is an indirect tax.