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S6 Economics: Hong Kong Tax System and Public Finance (Paper 2: intermediate)
S6 Economics: Hong Kong Tax System and Public Finance (Paper 2: intermediate)
This second paper deals with the three rate structures and the order of computation with allowances: subtract allowances to get taxable income, compute band by band, then compare with the standard rate.
Direct answers State the denominator of the average rate clearly, because using income and using taxable income give different numbers.
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 |
| Suggested time | 20 |
| Difficulty mix | Foundation 3 · Intermediate 3 · Challenge 3 · Error redo 1 |
| Chapter | Chapter: S6 Economics: Hong Kong Tax System and Public Finance |
| Level | S6 Economics |
02 Questions (10 items)
- FoundationWhat is a regressive tax?
- FoundationWhat is a proportional tax?
- FoundationTaxable income is $180,000. Using the bands 2%, 7%, 12% and 17%, what is the tax?
- IntermediateFollowing the previous question, standard rate tax is $27,000. How much is payable?
- IntermediateA person earns $400,000 with an allowance of $132,000. What is the taxable income and the tax using the same bands?
- IntermediateFor the same case, what is the average tax rate?
- ChallengeWhy is tobacco duty often described as regressive?
- ChallengePublic expenditure is usually divided into which two groups?
- ChallengeWhat is a budget surplus?
- Error redoA student computes only the progressive total and forgets the standard rate comparison. What is the consequence?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | A tax whose rate falls as income rises, so the burden is a larger share of a low income | A regressive tax is not about the rate falling in absolute terms but about the tax taking a smaller share as income rises. |
| 2 | The same rate applies whatever the income level | A proportional tax has a fixed rate, so the average rate equals the marginal rate. |
| 3 | $15,600 | The first three bands on 150,000 give 10,500 and the remaining 30,000 at 17% gives 5,100, totalling 15,600. |
| 4 | $15,600 | Comparing the two, the progressive total of 15,600 is lower, so the progressive figure is used. |
| 5 | Taxable income $268,000 and tax $30,560 | 400,000 minus 132,000 gives 268,000; the first three bands give 10,500 and the remaining 118,000 at 17% gives 20,060, totalling 30,560. |
| 6 | 7.64% | 30,560 out of 400,000 is 7.64%, and the denominator is total income rather than taxable income. |
| 7 | Low income earners spend a larger share of income on tobacco | The duty per pack is the same, yet it is a bigger share of a small income, so the share falls as income rises. |
| 8 | Recurrent expenditure and capital expenditure | Recurrent spending covers daily services such as education, health and welfare, while capital spending covers infrastructure and one off investment. |
| 9 | Government revenue is greater than expenditure | Revenue minus expenditure is positive for a surplus and negative for a deficit. |
| 10 | The tax may be overstated | If the standard rate total is lower and no comparison is made, the higher progressive figure is paid. |
04 What to do after marking
- After marking, redo only the wrong items and write down which step went wrong (formula, unit, or misread number).
- Repeat the same item two days later; move to the next paper only when both attempts are correct.
- Parents only need the answer and note columns; there is no need to explain every item.
The intermediate focus is the three rate structures: progressive, proportional and regressive. Write the income and the tax for each band before adding them up, and subtract allowances from income to obtain taxable income before applying the bands.Tutor Registration →
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