tax system

Expert replies

crazy4gmat: Master | Next Rank: 500 Posts; Posts: 160; Joined: Fri Aug 22, 2008 4:54 am; Thanked: 5 times; GMAT Score:660

by crazy4gmat » Tue Nov 11, 2008 10:36 am

Which of the following, if true, is the most logical completion of the argument below?
The tax system of the Republic of Grootland encourages borrowing by granting its taxpayers tax relief for interest paid on loans. The system also discourages saving by taxing any interest earned on savings. Nevertheless, it is clear that Grootland’s tax system does not consistently favor borrowing over saving, for if it did, there would be no______
(A) tax relief in Grootland for those portions of a taxpayer’s income, if any, that are set aside to increase that taxpayer’s total savings
(B) tax relief in Grootland for the processing fees that taxpayers pay to lending institutions when obtaining certain kinds of loans
(C) tax relief in Grootland for interest that taxpayers are charged on the unpaid balance in credit card accounts
(D) taxes due in Grootland on the cash value of gifts received by taxpayers from banks trying to encourage people to open savings accounts
(E) taxes due in Grootland on the amount that a taxpayer has invested in interest-bearing savings accounts

Source: Beat The GMAT — Critical Reasoning | Tue Nov 11, 2008 10:36 am

Jatinder: Master | Next Rank: 500 Posts; Posts: 280; Joined: Tue Sep 30, 2008 4:18 am; Thanked: 5 times; GMAT Score:610

by Jatinder » Tue Nov 11, 2008 11:01 am

Only A and D attacks at the right place
A is close SO IMO A

raunekk: Legendary Member; Posts: 1159; Joined: Wed Apr 16, 2008 10:35 pm; Thanked: 56 times

by raunekk » Tue Nov 11, 2008 11:11 am

https://www.beatthegmat.com/grootland-taxes-t13286.html

scoobydooby: Legendary Member; Posts: 1035; Joined: Wed Aug 27, 2008 10:56 pmFollowed by: 1 member; Thanked: 104 times

by scoobydooby » Thu Nov 13, 2008 2:38 am

IMO: E

Conclusion: Grootland's tax system does not always prefer borrowing to savings=>it prefers savings at times.

If it consistently preferred borrowing to saving, then in effect there would be no saving. interest on saving is taxed, so if there was no saving- no taxes on interest on savings-this is what E says

B, C, D are easily out of scope

A: no tax relief to increase savings. tax relief is only mentioned in the context of interest on borrowing, not saving.

E: correct brings out what would have happened if there were no savings. correct

nervesofsteel: Legendary Member; Posts: 594; Joined: Thu Aug 14, 2008 11:51 pm; Thanked: 12 times

by nervesofsteel » Thu Nov 13, 2008 11:03 am

Yes it should be A

as this option only says that there are tax reliefs on savings .. all other options says that tax reliefs are on borrowing

Stockmoose16: Master | Next Rank: 500 Posts; Posts: 347; Joined: Mon Aug 04, 2008 1:42 pm; Thanked: 1 times

Re: tax system

by Stockmoose16 » Thu Nov 13, 2008 12:03 pm

crazy4gmat wrote:Which of the following, if true, is the most logical completion of the argument below?
The tax system of the Republic of Grootland encourages borrowing by granting its taxpayers tax relief for interest paid on loans. The system also discourages saving by taxing any interest earned on savings. Nevertheless, it is clear that Grootland’s tax system does not consistently favor borrowing over saving, for if it did, there would be no______
(A) tax relief in Grootland for those portions of a taxpayer’s income, if any, that are set aside to increase that taxpayer’s total savings
(B) tax relief in Grootland for the processing fees that taxpayers pay to lending institutions when obtaining certain kinds of loans
(C) tax relief in Grootland for interest that taxpayers are charged on the unpaid balance in credit card accounts
(D) taxes due in Grootland on the cash value of gifts received by taxpayers from banks trying to encourage people to open savings accounts
(E) taxes due in Grootland on the amount that a taxpayer has invested in interest-bearing savings accounts

Only A makes sense here. The conclusions states, "Grootland's tax system does not consistently favor borrowing over saving, for if it did, there would be no..."

You are looking for a statement that shows Grootland offers tax relief to people who save money (rather than to just borrowers). A says that people who SAVE a portion of their income get tax relief.

peter.p.81: Master | Next Rank: 500 Posts; Posts: 300; Joined: Mon Apr 07, 2014 7:58 am

by peter.p.81 » Wed May 11, 2016 3:05 am

I'm pretty confident that A is correct answer.

GMAT Course Reviews

563 reviews

1168 reviews

431 reviews

359 reviews

147 reviews

5/5

5 Star (563 Reviews)

"Target Test Prep is the closest to the official version of the GMAT exam, about 99% accuracy in terms of the quality and quantity of information. The course has excellently created singular sets of focused lessons and tests for every possible topic that one could come across in the official GMAT exam."

"The TTP course maximizes the efficiency of the time you spend studying. It will take time and effort but I could almost guarantee that if you complete the course exactly as it is laid out you will get an amazing score. They also have a very responsive team willing to help with any questions you might have."

"TTP has two things that I think no other test prep company offers: A teaching approach that reinforces understanding and an attitude that will give you the mental preparedness needed to succeed on the test. TTP gives you a deep understanding of the concept you need to know while teaching you how to think."

Write a Review