An ad valorem tax is a tax imposed according to the:
Correct answer: A. Value of the taxed good or transaction
- A. Value of the taxed good or transaction
- B. Physical quantity of the taxed good
- C. Age of the person paying the tax
- D. Profit earned by the tax authority
Explanation
An ad valorem tax is calculated as a percentage of the value of a good, service, or transaction. A tax charged per unit, such as a fixed amount on each litre, is a specific tax instead.
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About Public Finance
Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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