Taxation of employment and interest income

CFA Level III
#1

Hello, here is the background info to the question:

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The question is: “calculate the tax that Stella Baghurst would have to pay if her income from employment was expected to be EUR 450,000, and she is to receive EUR 60,000 of interest income and EUR 100,000 of dividends. Assumed that EUR 25,000 of interest income is exempt from tax, and dividends are taxed at a favorable rate of 20% for all income levels.”

The answer is:

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Can someone help me understand:

  1. For tax on employment income, why is the 40% marginal tax rate applied to the entire EUR 450k? Shouldn’t the tax be calculated using: 30,000 + [(450,000 - 100,000) * 40%] ?

  2. For tax on interest income, why is 40% applied to the EUR 35k? I understand that EUR 35k is the excess that is taxable, but why use 40%?

Thanks!

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#2

re: (1)
the numbers in the table don’t make sense either, specifically Column 3 where they appear to have applied the marginal tax rate to the entire amount in Column 1

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