Neco Model Questions Vol1 2017 Economics Question 36

A developing country follows the simple growth‑accounting relation \(g = s - (\delta + n)\) where \(g\) is the annual growth rate of real GDP per capita (in %), \(s\) is the proportion of GDP devoted to investment, \(\delta\) is the depreciation rate of capital and \(n\) is the population‑growth rate. Currently \(\delta = 6\%\) per year, \(n = 2.5\%\) per year and the government finances all investment from a tax that is \(10\%\) of GDP. The government wishes to raise the real GDP per‑capita growth rate from the current \(1.5\%\) to \(4\%\) within the next year. Assuming the tax rate is the only source of investment and that all tax revenue is invested, what should be the new tax rate (as a percent of GDP) required to achieve the target growth rate?