Explain Horizontal And Vertical Equity?

Horizontal equity implies that we give the same treatment to people in an identical situation. E.g. If 2 people earn £15,000 they should both pay the same amount of income tax. Therefore, horizontal equity makes sure we don’t have discrimination on the grounds such as race / gender / different types of work.

Vertical Equity: Implies that that people with higher incomes should pay more tax. Vertical equity seeks to tax in a proportional or progressive way - People with more ability to pay should pay more tax.

Horizontal equity is an important starting point for any tax system. Horizontal equity can be consistent with also achieving vertical equity. Horizontal equity is the equal treatment of equals and this is a means for achieving a distribution of tax burdens that is vertically equitable.

Whether they are organized along benefit or ability to pay lines, most modern tax systems also attempt to incorporate modern views about fairness or equity. One important principle is that of horizontal equity, which states that those who are essentially equal should be taxed equally.
The notion of equal treatment of equals has deep roots in Western political philosophy. If you and I were alike in every way except the color of our eyes, all principles of taxation would hold that we should pay equal taxes. In the case of benefit taxation, if we receive exactly the same services from the highways or parks, the principle of horizontal equity states that we should therefore pay equal taxes. Or if a tax system follows the ability to pay approach, horizontal equity dictates that people who have equal incomes should pay the same taxes.
A more controversial principle is vertical equity, which concerns the tax treatment of people with different levels of income. Abstract philosophical principles provide little guidance in resolving the issues of fairness here. Be warned that general and abstract principles cannot determine the tax structure for a notion.