Consumption Tax


 

A Consumption tax is a tax on spending on goods and services. The tax base of such a tax is the money spent on consumption. Consumption taxes are usually indirect, such as a sales tax or a value added tax. However, a consumption tax can also be structured as a form of direct, personal taxation.

Consumption taxes can take the form of value-added taxes, sales taxes, tariffs, excise, expenditure taxes and other taxes on consumed goods and services. The term can also refer to a taxing system as a whole where people are taxed based on how much they consume rather than how much they add to the economy (income tax).