IB Economics · Unit 3.4

Taxation & Redistribution

A group activity on progressive, regressive, and proportional taxation — and what Vietnam does about inequality.

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Your role in this group

Phase 1: Become an expert

Your group is going to analyse three different types of taxation using the same three fictional households. Each person takes one tax type. Read your instructions carefully, do the maths, then discuss as a group before moving on.

The three households:

The Nguyens — annual income $20,000
The Smiths — annual income $60,000
The Garcias — annual income $150,000

Work out the tax bill and the effective tax rate (total tax ÷ total income × 100) for each household. Then answer: where does the burden fall most heavily?

Group A — Progressive tax

The three households:

The Nguyens — annual income $20,000
The Smiths — annual income $60,000
The Garcias — annual income $150,000

Your country uses a graduated income tax:

First $20,000 earned: taxed at 10%
$20,001–$60,000: taxed at 25%
Above $60,000: taxed at 40%

For each household, work out their total tax bill and their effective tax rate (total tax ÷ total income × 100). Then consider: why might high earners argue this is unfair? Why might low earners say it's essential?

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Group B — Regressive tax (sales tax)

The three households:

The Nguyens — annual income $20,000
The Smiths — annual income $60,000
The Garcias — annual income $150,000

Your country charges a flat 10% sales tax on all goods and services purchased. However, different households spend different proportions of their income — richer households tend to save more:

The Nguyens spend 80% of their income
The Smiths spend 60% of their income
The Garcias spend 40% of their income

For each household, work out how much they spend, how much sales tax they pay, and what percentage of their total income that tax represents. Then consider: why is a flat-rate tax on spending called regressive, even though the rate is identical for everyone?

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Group C — Proportional tax (flat tax)

The three households:

The Nguyens — annual income $20,000
The Smiths — annual income $60,000
The Garcias — annual income $150,000

Your country applies a flat 18% income tax on everyone, no exceptions.

For each household, work out their total tax bill and their effective tax rate. Then consider: what are the arguments for this system? What are the arguments against?

Your notes

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Your group's Phase 1 notes

Use these as a reference when writing your definitions below. Refresh the page if a teammate's notes haven't appeared yet.

Person A — Progressive

Person B — Regressive

Person C — Proportional

Our group's definitions

Edit this together. Make sure your definitions are in your own words and make sense to all three of you. Auto-saved every 30 seconds.

Progressive tax:

Regressive tax:

Proportional tax:

Sort these cards

Drag each card into the correct tax type. You can move cards between zones.

Card pool — drag from here:

Progressive

Regressive

Proportional

Phase 2A: What does Vietnam actually do?

Using the sources below, research Vietnam's approach to taxation and inequality over the past 20 years. Look for: what mix of taxes Vietnam relies on, how this has changed, and what non-tax policies the government has used. Then write a short summary of what you think the government's priorities have been — and whether it's working.

Sources

Things to look for as you read:

You don't need to answer every question — use them to guide your reading and thinking as you write your summary below.

On the tax system

What are the main taxes the Vietnamese government collects? How does the mix between direct and indirect taxes compare to other countries in the region?
Vietnam only introduced a formal Personal Income Tax law in 2007. What does that tell you about how recently the progressive system was built, and what might have come before?
The top rate of income tax is 35%, but it only kicks in at relatively high incomes. Who in Vietnam actually pays significant personal income tax — and who doesn't, and why?
VAT is 10% and applies broadly. Using the World Bank source, explain why a flat-rate VAT can be regressive in practice even if it looks neutral on paper.
The 2025–26 reforms are reducing the number of tax brackets from seven to five and raising the thresholds. Who benefits most from this change, and what does it suggest about the government's priorities?

On non-tax policy

Vietnam has massively expanded health insurance coverage since the early 1990s. Does this count as redistribution? How would it affect a household's real income even if their cash income stays the same?
The National Target Program on Poverty Reduction has existed in various forms since 1998. What kinds of support does it include beyond cash transfers?
Despite overall success in reducing poverty, which groups remain most left behind, and what does the evidence suggest about why?

On the big picture

Vietnam's Gini coefficient peaked around 2010 at roughly 0.39 and has since fallen to around 0.36. Is that a meaningful improvement? What would need to happen for the Lorenz curve to shift noticeably toward the line of equality?
If you had to sum up the Vietnamese government's approach in one sentence — is it primarily about raising revenue efficiently, reducing inequality directly, or attracting investment and growth? Can it be all three at once?

In your own words: what has Vietnam done to address inequality? What does the evidence suggest about whether it's working, and for whom?

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Vietnam summaries from your group

Refresh the page if a teammate's summary hasn't appeared yet.

Person A

Person B

Person C

Phase 2B: You are a non-political NGO

You've been asked to advise on reducing inequality in Vietnam. You have no political agenda — your only goal is a fairer society with sustainable growth.

Drawing on what all three of you have learned, craft a short position statement together. It should:

Describe how Vietnam is currently addressing inequality (tax and non-tax)
Identify where the gaps or failures are
Propose 3–4 concrete recommendations, ranked by priority
Explain what effect each recommendation would have on the Lorenz curve or Gini coefficient if successful

Remember: you're not a political party. If a recommendation sounds like "tax the rich more," think about how an evidence-based NGO would frame that instead.

Group position statement

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