Based on the method used for the calculation of the tax

• Proportional Tax
  Here tax is levied at a fixed rate on the amount of income earned. A proportional tax is a tax whose burden is the same rate regardless of the income earned by the household. For example, under a proportional tax system, if the income tax rate is 10%, then a household who earns GH¢10,000 will pay 10% of their income in taxes, while a household who earns GH¢10 million will also pay 10% of their income as taxes.                                          (1 mark)
• Progressive Tax
  Here the rate that is used to calculate the amount of tax is determined by the person’s total income. The bigger the person’s income the more tax he will pay. A progressive tax is a tax that takes a higher percentage of income from higher income households than from lower income households. The current income tax system in Ghana on PAYE is a progressive tax. For example, under a progressive tax system, a household that earns GH¢10,000 would pay a 5% income tax while a household that earns GH¢10 million would have to pay a 35% income tax.                                       (1 mark)
• Regressive Tax
  This is where the tax rate reduces as the person’s total incomes gets bigger. This type of tax does not exist in most countries, but a typical excise tax is regressive.                                                   (1 mark)

Based on who has the responsibility to pay the tax

• Direct Tax
  In this case the impact and incidence of tax falls on the same person. Direct taxes are taxes on income. A Direct tax is a kind of charge, which is imposed directly on the taxpayer and paid directly to the government by the persons. The burden of direct tax is one that cannot be shifted by the taxpayer to someone else. Examples of Direct Taxes are: personal income tax from labour, interest etc, Company tax, Property tax, Stamp duties, Rent tax.                                                       (1 mark)
• Indirect Tax
  Here the impact and incidence of the tax falls on different people. Indirect taxes are taxes on spending. It is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). An indirect tax is one that can be shifted by the taxpayer to someone else. This kind of tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products. Examples of Indirect Taxes are: Export and import tax, Excise tax, Surcharges, Entertainment tax, Licences, Value added tax, Petroleum tax.          (1 mark)