FinTech Glossary

What Is Horizontal Equity

Horizontal equity is a principle of taxation that states that individuals or entities with similar income or financial capacity should be taxed equally. It focuses on fairness by ensuring that taxpayers in similar situations bear the same tax burden.

Horizontal Equity in Taxation

In practice, horizontal equity means that two taxpayers with the same income should pay the same amount of tax.

Differences in tax treatment based on factors unrelated to income or ability to pay can violate this principle.

Tax systems aim to support horizontal equity by standardising tax rules and limiting arbitrary exemptions.