CIMA F1 Syllabus C. Fundamentals Of Business Taxation - Indirect Tax Features - Notes ^{4 / 10}

Unit Taxes

These are based on the number of units or weight of an item

eg. Excise duties on tobacco

Ad Valorem Taxes

These are based on the VALUE of the items e.g.. VAT

Excise Duties

These are an example of a UNIT tax

1. Good for items with large volumes

2. Good for items that are easily controlled as theres few producers / products

3. Examples are alcohol, tobacco, petrol

4. It is not charged on the end consumer, rather the producer so tax is collected earlier

5. They're not refundable so make up the cost of the item for the producer

Wealth and Property taxes

• Property Tax

  Think here about council taxes on the value of your property

• Wealth Tax

  This will be a tax on your net worth (Assets - Liabilities)

Hypothecated Tax

A hypothecated tax is a tax whose revenues are to be spent on a specific program or use. 

For e.g., a road toll being used to fund the construction of new roads is an example of a hypothecated tax.