What does "pay-as-you-go" taxation require?

The correct answer is that "pay-as-you-go" taxation requires taxpayers to pay tax as income is earned throughout the year. This system is designed to collect taxes in a timely manner, reflecting the taxpayer's income levels as they receive it. This helps to ensure that taxpayers are not faced with a significant tax burden at the end of the year and promotes better cash flow management for both the taxpayers and the government.

In the "pay-as-you-go" system, individuals and businesses typically make periodic estimated tax payments throughout the year, based on their income. This aligns with the principle of taxation being based on the ability to pay, thereby preventing large, lump-sum payments that can create financial strain.

Other options do not align with the pay-as-you-go principle. For instance, tax payments only at the end of the year would contradict the innate structure of this taxation method. Similarly, only taxing major purchases does not accurately reflect the ongoing nature of income taxation captured under the pay-as-you-go framework. Lastly, making advance payments for future income is not the premise of this taxation model, which focuses on current income rather than income that has not yet been earned.