Expenditure Tax

Business, Legal & Accounting Glossary

Definition: Expenditure Tax




Full Definition of Expenditure Tax


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.

Expenditure Funds

Following are some sources of expenditure funds.

  • Bank balances and cash at hand (at starting of a year)
  • Salary and other types of compensation accruing from personal services
  • Dividends and interest income
  • Interest accruing from government obligations
  • Rent
  • Royalty receipts
  • Annuity income and insurance benefits
  • Pension
  • Cash gifts
  • Bequests
  • Receipts from capital asset sales

Expenditure

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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Definition Sources


Definitions for Expenditure Tax are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 26th March, 2020 | 1 Views.