This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.
ScanSolve AI Answer
Taxable Income = 35000 - 1750 = GHC 33250 a) His taxable income is GHC 33250. b) Calculate his annual income tax. Step 1: Apply the tax schedule to the taxable income of GHC 33,250. • First GHC 240: Taxed at 0% (Free). Tax_1 = 0 × 240 = GHC 0 Remaining taxable income: 33250 - 240 = 33010 • Next GHC 240: Taxed at 5%. Tax_2 = 0.05 × 240 = GHC 12 Remaining taxable income: 33010 - 240 = 32770 • Next GHC 1,200: Taxed at 10%. Tax_3 = 0.10 × 1200 = GHC 120 Remaining taxable income: 32770 - 1200 = 31570 • Next GHC 2,000: Taxed at 17.5%. Tax_4 = 0.175 × 2000 = GHC 350 Remaining taxable income: 31570 - 2000 = 29570 • Next GHC 2,000: Taxed at 24%. Tax_5 = 0.24 × 2000 = GHC 480 Remaining taxable income: 29570 - 2000 = 27570 Step 2: Calculate tax on the remaining income. The tax schedule provided ends at the 24% bracket. For the remaining GHC 27,570, we assume the next progressive tax rate, which is commonly 30%. • Remaining GHC 27,570: Taxed at 30% (Assumption based on typical progressive tax schedules). Tax_6 = 0.30 × 27570 = GHC 8271 Step 3: Sum all tax amounts to find the total annual income tax. Total Annual Income Tax = Tax_1 + Tax_2 + Tax_3 + Tax_4 + Tax_5 + Tax_6 Total Annual Income Tax = 0 + 12 + 120 + 350 + 480 + 8271 = GHC 9233 b) His annual income tax is GHC 9233. c) Calculate his annual income deductions. The only deduction mentioned is the Social Security Contribution, as he pays no tax on this amount. Annual Income Deductions = Social Security Contribution = GHC 1750 c) His annual income deductions are GHC 1750. d) Calculate his net annual salary. Step 1: Calculate total deductions. Total deductions include the Social Security Contribution and the Annual Income Tax. Total Deductions = Social Security Contribution + Annual Income Tax Total Deductions = 1750 + 9233 = GHC 10983 Step 2: Subtract total deductions from the annual salary to find the net annual salary. Net Annual Salary = Annual Salary - Total Deductions Net Annual Salary = 35000 - 10983 = GHC 24017 d) His net annual salary is GHC 24017.