Th1.2: Indirect Taxes Flashcards
1
Q
What is an indirect tax?
A
tax on expenditure where the person who is ultimately charged the tax is not the person responsible for paying the sum to the government
2
Q
What are the two types of tax?
A
ad valorem
specific
3
Q
What is Ad Valorem tax?
A
where the tax payable increases in proportion to the value of the good. it is a percentage of the cost of the good
4
Q
What is specific tax?
A
where an amount is added to a price. the tax increases with the amount bought rather than the value of goods
5
Q
Example of Ad Valorem tax?
A
VAT
6
Q
Example of Specific tax?
A
excise duties on alcohol
7
Q
What macroeconomic effects does a tax have?
A
can be regressive
