expenditure taxa form of INDIRECT TAX which is added to the selling price of a good or service and which is borne by consumers of these products. VALUE ADDED TAX, EXCISE DUTIES and CUSTOMS DUTIES are the main types of expenditure tax levied in the UK. Expenditure taxes, along with various taxes on income (see DIRECT TAX), are used by the government to raise revenue (see BUDGET) and as a means of regulating the level of spending in the economy (see FISCAL POLICY).
expenditure taxa form of INDIRECT TAX that is incorporated into the selling price of a product and is borne by the consumer.
In raising revenue and applying FISCAL POLICY, governments have two broad choices: the use of taxes on expenditure and the use of taxes on INCOME (DIRECT TAXES). Taxes on income, such as INCOME TAX, deduct tax at source, whereas taxes on expenditure are levied at the point of sale. Direct taxes tend to be PROGRESSIVE TAXES insofar as the amount of tax paid is related to a person's income, whereas expenditure taxes are REGRESSIVE TAXES insofar as consumers pay tax in proportion to their spending, regardless of income.