Business, Legal & Accounting Glossary
Expenditure tax is a tax, which is assessed on expenditure or amount spent. It is also known as a consumption tax. Tax is defined as a fee, which is charged and collected by a country’s government on a commodity, activity or income. Taxation is primarily for the financing of government expenditure. It is argued by some economists that an expenditure tax is complex and it increases administrative taxation burden. However, still, others hold that though certain problems exist they are definitely not insurmountable. From a neutral standpoint, case for or against the imposition of expenditure tax ought to be determined solely on whether economic benefits accruing from the adoption of that tax outweighs its administrative cost. Tax-policy makers often opine in favour of expenditure taxes vis a vis income taxes as a vehicle for growth. This conclusion is drawn from the model of endogenous growth theory. Policy analysts are in favour of progressive expenditure taxes so that effects of regressivity associated with sales tax are absent.
Following are some sources of expenditure funds.
It involves the payment of money for commodities and services. Monetary payment obligations are documented in the form of invoices, vouchers and receipts to name a few. Expenditure can be again classified into revenue expenditure and capital expenditure. Revenue expenditure is essentially money, which is paid for the use of commodities and services, which are consumed in the short run. Capital expenditure, on the other hand, is the money used for buying fixed assets, which have a shelf life of over one year.
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This glossary post was last updated: 26th March, 2020 | 1 Views.