Question

Suppose that Spain has a workforce of 22.85 million people, and that the average salary for each person is €24,200 annually. Spain has imports of €290.85 billion and exports of €200.13 billion. If the Spanish government levies a 7% tariff on exports, an 18% tariff on imports, and a 21% income tax, how will the revenue gained from tariffs and the revenue gained from income tax compare?
a.
The government will earn €80.7214 billion more from tariffs than from income tax.
b.
The government will earn €29.5030 billion more from tariffs than from income tax.
c.
The government will earn €63.7707 billion more from income tax than from tariffs.
d.
The government will earn €49.7616 billion more from income tax than from tariffs.


Please select the best answer from the choices provided

A
B
C
D
Mark this and return

Answer 1

D

Income tax revenue = 22.85 million × €24,200 × 21% = €552.97 billion × 0.21 = €116.1237 billion
Tariff revenue = 7%×€200.13B + 18%×€290.85B = €14.009B + €52.353B = €66.362B
Difference = €116.1237B − €66.362B ≈ €49.7616B more from income tax (choice D).