Automated Market Makers (AMMs) are a decentralizedDecentralization refers to the property of a system in which nodes or actors work in concert in a distributed fashion to achieve a common goal.
Click to read more → exchangeBusinesses that allow customers to trade cryptocurrencies for fiat money or other cryptocurrencies.
Click to read more → protocol that allows users to trade cryptocurrencies without needing traditional order books. Instead of relying on buy and sell orders placed by users, AMMs use smart contracts and liquidityLiquidity indicates how easy it is to convert a cryptocurrency into cashCash is the most liquid form of money: physical coins and banknotes in the most narrow sense of the term.
Click to read more → quickly — and whether this can be achieved without the assetAssets are the resources that an organization can use to generate revenue or benefit.
Click to read more →’s value suffering.
Click to read more → pools to facilitate trades. If the term “Virtual Automated Market Makers (vAMMs)” has emerged since my last update, it could refer to an evolution or extension of the AMM concept with additional virtual or programmable features. These decentralized exchange protocols utilize liquidity pools and algorithms to enable users to trade digitalDigital technologies are these electronic tools that have the ability to generate, store or even process data.
Click to read more → assets directly from their wallets. Popular examples include Uniswap […]
Click to read more →A progressive tax is a type of tax system where the tax rate increases as income increases. This means people who earn more pay a higher percentage of their income as tax, while people who earn less pay a lower percentage.
It is designed to reflect income capacity so that the burden of tax is not uniform. The whole idea behind progressive tax is fairness. Everyone pays tax, but higher earners contribute a larger share.
In simple terms, progressive tax tries to balance economic distribution. It recognises that someone earning a very low monthly income should not be taxed at the same percentage rate as someone earning a very high monthly income. That difference in earning capacity guides the tax structure.
Why Progressive Tax Is Called Progressive
It is called progressive because tax moves upward as income level rises. The tax rate progresses. The tax band climbs. The more someone earns, the higher the tax percentage that applies.
No one is taxed more than they earn, but those with higher earnings contribute a bigger percentage since they have more financial power.
This system tries to ensure that tax does not deepen poverty and does not leave all the heavy weight of government funding on the poor.
Examples Of Progressive Taxes
The most popular example of progressive tax is Personal Income Tax. In Nigeria, the Personal Income Tax Act uses tax bands that increase as taxable income increases.
Lower bands have lower percentages and upper bands have higher percentages.
Another example can be capitalCapital is most commonly defined as the large sum of money you would use to invest.
Click to read more → gainsGains refer to an increase in value or profit.
Click to read more → on certain assets in some jurisdictions. Some countries also design inheritance tax and some luxury taxes with progressive principles. The main goal is to balance contribution with economic ability.
Why Government Uses Progressive Tax
Government uses progressive tax as a way to redistribute economic pressure fairly. High earners have more capacity to contribute to national revenue. Low earners need more protection because they already struggle with limited income.
Progressive tax aims to protect weaker earners while still capturing revenue from the economy.
Some reasons governments like this system include:
- It supports fairness
- It reduces pressure on low income households
- It helps government raise bigger revenue from high value economic zones
- It helps reduce inequality between high and low earners
How Progressive Tax Works In Nigeria
Nigeria uses progressive rates mainly for Personal Income Tax. Someone with lower taxable income falls within the lowest percentage bracket. As the taxable income climbs into another bracket, a new percentage applies. That higher rate does not apply to the entire income, only the portion within that bracket.
It is similar to climbing steps. Each step has its own percentage.
This prevents the system from punishing the entire income amount with one huge percentage.
Difference Between Progressive And Regressive Taxes
Progressive tax increases with income. Regressive tax does not. Progressive tax tries to protect low income families. Regressive tax makes them bearSomeone who believes that prices in a given market will decline over an extended period. Such a person might be referred to as “bearish.”
Click to read more → heavier burden.
Progressive tax is built on equityEquity is the funds that would be returned to a company's shareholders if all of the company's assets were dissolved and all debts were paid off in the event of liquidation.
Click to read more → and income responsiveness. Regressive tax is built on uniform percentage on consumption.
Progressive tax takes income into accountAn account is essentially a whose purpose is to track the financial activities of a specific asset/
Click to read more →. Regressive tax ignores income differences.
The Social Impact Of Progressive Tax
Progressive tax can help reduce the risk of extreme wealth imbalance. If the rich paid the same exact percentage as the poor, the difference in disposable income would widen dramatically.
Progressive tax tries to make sure that the economy does not tilt into extreme inequality where the wealthy pay very little and low income earners carry the weight.
Many countries use progressive tax to support social support policies such as education, healthcare, housing and welfare funding.
Challenges Of Progressive Tax
Even though progressive tax promotes fairness, it has challenges. Higher earners sometimes feel discouraged from earning even more if they notice that the government takes a larger percentage from additional gains.
It can also make some people look for ways to avoid tax by disguising their income.
Tax authorities need proper auditAn audit is a process where developers inspect the underlying codeThe action of coding is to write programming statements for a program.
Click to read more → and/or algorithmA process or set of rules to be followed in problem-solving or calculation operations, usually by a computer.
Click to read more → that compose systems and applications.
Click to read more → and enforcement to make progressive systems work correctly.
Why People Debate Progressive Tax
Some people argue that progressive tax is the fairest tax system because it acknowledges the real financial situation of citizens.
Others believe that too much increase in rates at upper income levels discourages productivity and investment.
Both arguments exist in global tax conversations.
However, progressive tax generally remains one of the most accepted fair tax models in most countries.
Conclusion
Progressive tax is a taxation approach where tax percentage rises as income rises. It is grounded in fairness. It reduces the burden on people with low income and charges higher earners a larger share based on their financial strength.
In Nigeria, progressive taxation is mainly seen in Personal Income Tax where rates are banded by income levels. Progressive tax helps balance society by preventing uniform tax pressure on people who cannot afford it.