Waec Model Questions Vol1 2022 Economics Question 1

The government collects revenue from two sources: (i) an income tax that is levied at 5 % on the low‑income group, 10 % on the middle‑income group and 15 % on the high‑income group; (ii) a value‑added tax (VAT) on consumption. The population consists of three income groups: low (30 % of the population, average income ₦200,000), middle (50 % of the population, average income ₦500,000) and high (20 % of the population, average income ₦1,200,000). Consumption is assumed to be 60 % of each group's income. Government spending this year is ₦150 billion. After a 20 % increase in spending the government wants to achieve a balanced budget by adjusting only the VAT rate (the income‑tax rates remain unchanged). What VAT rate (as a percentage, rounded to one decimal place) is required to balance the budget?