The tax system of the Republic of Grootland encourages borrowing by gr

Question

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

KarishmaB · Accepted Answer

Argument:
The system taxes the saving, and provides tax relief on borrowing. 
However, this policy is not consistently followed because else it wouldn't ...

Now we need to find an option that is  opposite  to the policy. We need to look for an option which shows:
- either tax the borrowing
- or tax relief to the saving

(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

This provides tax relief to increased saving. This is our answer.

(B) tax relief in Grootland for the processing fees that taxpayers pay to lending institutions when obtaining certain kinds of loans

This provides tax relief in fees for borrowing. Doesn't work.

(C) tax relief in Grootland for interest that taxpayers are charged on the unpaid balance in credit card accounts

This provides tax relief for interest on unpaid CC balance (borrowing). Doesn't work.

(D) taxes due in Grootland on the cash value of gifts received by taxpayers from banks trying to encourage people to open savings accounts

This taxes gifts received on trying to save. Doesn't work.

(E) taxes due in Grootland on the amount that a taxpayer has invested in interest-bearing savings accounts

This taxes amount invested in savings account. Doesn't work.

Answer (A)

GMAT TIGER · Answer

A. If Grootland’s tax system consistently favor borrowing over saving, there would be either tax relief for borrowing or tax due on savings. However its not the case. Since it offers tax relief for taxpayer’s income that are set aside to increase that taxpayer’s total savings.

So A is correct.

celan · Answer

Question Type: Complete + Justify

Premise: tax system encourages borrowing and discourages saving 
Assumption: 
Conclusion: tax system does not favor borrowing over saving
How to solve ? We need to find opposite to the policy (tax reilf to the saving or tax the borrowing)

A: Correct, This option is an example of encouraging saving
B: This option is an example of encouraging borrowing
C: This option is an example of encouraging borrowing
D: This option is an example of discouraging saving
E: This option is an example of discouraging saving

TBT · Answer

It took me more than 2 minutes to undersand what exactly what the question asking. Got confused between the options. But I finally got it. Best approach in such questions is to exactly write what is needed like in karishma's explanation otherwise you'll always be to and from among the options!

kavishek · Answer

KarishmaB 
As at the end of the passage the last word is "no" , so it doesn't mean that -there would be  no   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 . Then As per option A , there will be no tax relief on Savings account and hence it discourages the savings.

Please advice.

KarishmaB · Answer

I am not sure I understand your doubt. This is the summary of the argument:

Context: Grootland's tax system favors borrowing and discourages saving in some aspects
Author's conclusion: But it does not consistently favor borrowing over saving, 
Premise: If it consistently favoured borrowing over saving, there would be no ... What would complete it? There would be NO "tax A on borrowing" or "tax relief B on saving."

The author is saying that though Grootland favors borrowing and discourages saving, the principle is not followed consistently. If it were followed consistently then a certain tax or tax relief would NOT be there. Which tax or tax relief would this be? A tax on borrowing or a tax relief on saving (opposite to the principle).

So we have to find a tax on borrowing or a tax relief on saving in the options.

Option (A) gives a tax relief on saving. So yes, this would not have been there if the principle were followed consistently.

Raman109 · Answer

This is an inference fill-in-the-blank question where in "if...then..." condition is used.

If it supported borrowing ...then ....
As Karishma also pointed out, we are either looking for an option
1. that taxes the borrowing 
2. or that provides tax relief to the savings (this is what option A does)

iamjatinagrawal · Answer

Facts - Tax system encourages borrowing, Tax system discourages savings.

Conclusion - Nevertheless, it is clear that Grootland's tax system does not consistently favor borrowing over saving.

If it doesn't favor borrowing over saving then either there is some tax relief in savings or there is some tax due over borrowing.  Option (A)  tells us that there is some tax relief on savings. Hence this is the answer.

(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 -  Encouraging savings which is not in line with the information provided by the passage before the conclusion drawn.

(B) tax relief in Grootland for the processing fees that taxpayers pay to lending institutions when obtaining certain kinds of loans -  Encouraging borrowing

(C) tax relief in Grootland for interest that taxpayers are charged on the unpaid balance in credit card accounts -  Encouraging borrowing

(D) taxes due in Grootland on the cash value of gifts received by taxpayers from banks trying to encourage people to open savings accounts -  Discouraging savings

(E) taxes due in Grootland on the amount that a taxpayer has invested in interest-bearing savings accounts -  Discouraging savings

The tax system of the Republic of Grootland encourages borrowing by gr

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The tax system of the Republic of Grootland encourages borrowing by gr

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