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Horizontal Equity

   Also found in: Wikipedia 0.01 sec.
Horizontal Equity
A theory that persons or corporations who earn the same or a similar amount of money should be taxed in the same or a similar way. For example, horizontal equity states that two individuals making $50,000 per year should be taxed the same amount, regardless of how they earned their income. Horizontal equity is the idea behind the progressive tax system in place in many countries, though few countries implement it entirely.


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Undercollection of payroll tax not only deprives the government of revenue, it raises a question of horizontal equity.
Equity is generally measured against two criteria: vertical equity requires that a person who is capable of paying more tax should pay more tax; while horizontal equity requires that a person who is in same circumstances as another person should pay the same amount of tax as that other person.
This issue of horizontal equity may, in fact, be one of the pressing issues of many international outsourcing decisions.
 
 
 
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