If tax rate decreases with increase in taxable base, then this type of taxation is called:

The correct answer is regressive.

Key Points

• A regressive tax system is one in which the tax rate decreases as the taxable amount (or income) increases.
• In a regressive system, lower-income individuals pay a higher percentage of their income in taxes than higher-income individuals. 
• Regressive taxes can lead to increased income inequality.
• Examples of Regressive Taxes: Sales Taxes, Excise Taxes.

Additional Information

• Progressive Taxation:
  • This tax system imposes a higher tax rate on higher-income earners.
  • As income increases, so does the tax rate, ensuring that wealthier individuals pay a larger proportion of their income in taxes.
• Degressive taxation
  • It is a hybrid tax system combining regressive and proportional taxation elements.
  • In a degressive tax system, the tax rate decreases as the income or taxable base increases, but not as drastically as in a regressive tax system.
  • It starts with a progressive rate for lower income levels but eventually flattens out, so the tax burden becomes less steep for higher income brackets.
• Increasing tax rate system is the same as progressive taxation.