Overview

specific tax


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A tax levied as a fixed sum on each physical unit of the good taxed, regardless of its price. This is in contrast to an ad valorem tax, where the tax is proportional to the price of the good. Specific taxes have administrative advantages where measuring quantities is simple, for example in licensing cars or television sets. The disadvantage of specific taxes is that the real yield of specific taxes is eroded by inflation.

Subjects: Economics.


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