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S6 Economics: Hong Kong Tax System and Public Finance (Paper 3: challenge)
S6 Economics: Hong Kong Tax System and Public Finance (Paper 3: challenge)
The third paper links the tax system to four public finance indicators: tax as a share of GDP, direct tax as a share of total revenue, the budget surplus or deficit, and the effect of a change in the bands.
Direct answers Every percentage needs its denominator stated, because a share of GDP and a share of total revenue are very different answers.
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)
- FoundationTaxable income is $235,000. Compute the tax using the bands.
- FoundationGovernment expenditure is $680 billion and revenue $610 billion. What is the budget position?
- FoundationTax revenue is $300 billion and GDP is $2,800 billion. What percentage of GDP is tax revenue?
- IntermediateDirect tax revenue is $180 billion out of total tax revenue of $300 billion. What share is direct tax?
- IntermediateWhat does a progressive rate do to income distribution?
- IntermediateA taxpayer has taxable income of $300,000. If the top band rate falls from 17% to 16% with other bands unchanged, how much less tax is paid?
- ChallengeInflation raises nominal income while tax bands stay unchanged. What happens?
- ChallengeWhat are the two main features of a public good?
- ChallengeComprehensive Social Security Assistance is a transfer payment. Why is it not part of government consumption expenditure?
- Error redoA student treats a budget deficit and a trade deficit as the same thing. What is wrong?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | $24,950 | The first three bands on 150,000 give 10,500 and the remaining 85,000 at 17% gives 14,450, totalling 24,950. |
| 2 | A deficit of $70 billion | Revenue minus expenditure is 610 minus 680, that is minus 70, a deficit of 70 billion. |
| 3 | About 10.7% | 300 divided by 2,800 is 0.1071, about 10.7%, with GDP as the denominator. |
| 4 | 60% | 180 out of 300 is 0.6, that is 60%, and here the denominator is total revenue rather than GDP. |
| 5 | Higher income groups bear a larger share, which helps narrow income gaps | A progressive rate places a larger proportional burden on high income groups, and the revenue funds transfers and public services, producing redistribution. |
| 6 | $1,000 less | Only the remaining 100,000 is affected, and 100,000 times one percentage point gives 1,000. |
| 7 | Bracket creep, so the average rate rises | Income is pushed into higher bands without a rise in real purchasing power, so the tax share increases, which is called bracket creep. |
| 8 | Non excludability and non rivalry | Non excludability means others cannot be prevented from using it, and non rivalry means one person using it does not reduce what others can use, as with national defence and street lighting. |
| 9 | Because no goods or services are received in return | Government consumption expenditure counts only purchases of goods and services, while a transfer payment merely redistributes income. |
| 10 | A budget deficit is government revenue below expenditure, while a trade deficit is imports exceeding exports | They belong to different accounts, one to the government budget and one to external trade, and their figures come from different sources. |
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 challenge paper links the tax system to public finance: tax as a share of GDP, direct tax as a share of total tax revenue, and budget surplus or deficit. Every answer states its unit and says whether it is a share of GDP or of total revenue.Tutor Registration →
Questions and answers are written originally by the TutorZone team and are not taken from any school, publisher or examination authority paper. Every value is checked by computer.