Diagram of specific tax. The specific tax is P2-P0. Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well. These are the traditional type of sales tax.
On a value-added tax (VAT), the net tax amount is the difference between the input costs and the sales price.
State governments use taxes on income and consumption, while local governments rely almost entirely on taxing property and wealth. The tax incidence depends upon the relative elasticity of demand and supply.
The Federal Government taxes income as its main source of revenue.
A tax of £0.75 per litre of petrol.
Learn more about taxation in this article.
Placing a specific tax on a good shifts the supply curve to the left.
The second type of sales tax is a value added tax. The purpose of taxation is to finance government expenditure .
Tax Revenue forms part of the Receipt Budget, which in turn is a part of the Annual Financial Statement of the Union Budget. A specific tax does not vary with the cost of the good – like for example an ad valorem tax – which is a percentage of the price.
Sales taxes come in two varieties. Taxation, imposition of compulsory levies on individuals or entities by governments.
The consumer burden of a tax increase reflects the amount by which the market price rises. Tax Incidence: A tax incidence is an economic term for the division of a tax burden between buyers and sellers . If tax is levied on the price of a good or service, then it is called an indirect tax.
One of the most important uses of taxes is to finance public goods and services , such as street lighting and street cleaning. Tax incidence refers to how the burden of a tax is distributed between firms and consumers (or between employer and employee). A specific tax is borne by both producers and consumers.
Governments pay for these services through revenue obtained by taxing three economic bases: income, consumption and wealth. The first is a consumption tax or retail sales tax which is a straight percentage tax placed on the sale of a good.
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