Which type of tax is characterized as regressive?

A regressive tax is defined as a tax system where the tax rate decreases as the taxable amount increases, meaning that lower-income individuals pay a higher percentage of their income compared to higher-income individuals. Value-Added Tax (VAT) is often cited as a regressive tax because it is applied uniformly to goods and services regardless of the purchaser's income level. As a result, lower-income individuals, who spend a larger portion of their income on consumption, effectively bear a heavier burden relative to their income compared to wealthier individuals, who can save more of their income and pay a smaller percentage in taxes.

In contrast, income tax, corporation tax, and capital gains tax are typically considered progressive or proportional taxes, where the tax rate increases as the tax base (income, profits, or gains) increases. This means that as individuals or entities earn more, they pay a higher percentage in taxes, which is not the case with VAT. This characteristic of VAT illustrates its regressive nature and explains why it is the correct choice for this question.