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

Explanation:

Step1: Calculate income tax revenue

The workforce is 22.85 million people, and the average salary is €24,200 annually. The income tax rate is 21%. First, find the total income: \( 22.85\times10^6\times24200 \). Then multiply by the tax rate (0.21) to get income tax revenue.
Total income \( = 22.85\times10^6\times24200 = 22.85\times24200\times10^6 = 552970\times10^6 = 552.97 \) billion euros.
Income tax revenue \( = 552.97\times0.21 = 116.1237 \) billion euros.

Step2: Calculate tariff revenue

Exports are €200.13 billion (7% tariff) and imports are €290.85 billion (18% tariff).
Tariff on exports: \( 200.13\times0.07 = 14.0091 \) billion euros.
Tariff on imports: \( 290.85\times0.18 = 52.353 \) billion euros.
Total tariff revenue \( = 14.0091 + 52.353 = 66.3621 \) billion euros.

Step3: Compare income tax and tariff revenue

Find the difference: \( 116.1237 - 66.3621 = 49.7616 \) billion euros. So income tax revenue is €49.7616 billion more than tariff revenue.

Answer:

d. The government will earn €49.7616 billion more from income tax than from tariffs.