15 Facts About Consumption tax

Consumption tax is a tax levied on consumption spending on goods and services.

However, a consumption tax can be structured as a form of direct, personal taxation, such as the Hall–Rabushka flat tax.

Value-added tax applies to the market value added to a product or material at each stage of its manufacture or distribution.

For example, if a retailer buys a shirt for twenty dollars and sells it for thirty dollars, this Consumption tax would apply to the ten dollar difference between the two amounts.

Simple value-added tax is proportional to consumption but is regressive on income at higher income levels, as consumption tends to fall as a percentage of income as income rises.

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Value added tax is a consumption based tax and is levied each and every time the value of a good gets increased in the process of manufacturing to the point of sale.

Sales tax is a consumption tax applicable to sales of goods and services.

The Consumption tax amount is usually ad valorem, that is, it is calculated by applying a percentage rate to the price of a sale.

An excise Consumption tax is a sales Consumption tax that applies to a specific class of goods, typically alcohol, tobacco, gasoline, or tourism.

Sin taxes, are a type of excise tax imposed on items that are considered harmful to society, in an effort to decrease their consumption by increasing their prices.

However, because this Consumption tax applies on an individual basis, it can be made progressive.

Shortly after the tax was introduced Japan fell into recession, which was blamed by some on the consumption tax increase, and by others on the 1997 Asian financial crisis.

Also, a consumption tax could utilize progressive rates in order to maintain "fairness".

Temporal neutrality of a consumption tax is that consumption itself is taxed, so it is irrelevant what good or service is being consumed in terms of allocation of resources.

Tax base of consumption tax depends mostly on the ability to save money, it can be expected that middle-aged individuals will have the smallest tax burden as a percentage of their annual income.