Excise Tax.

25 04 2011

Excise tax is commonly known as an inland tax, a tax on a specific good or service, often imposed on the quantity purchased rather than the value. An excise is an indirect tax which makes the producer or seller pay taxes to the government and try to recover the tax through raising prices. Excise tax is usually imposed in addition to anther indirect tax such as sales tax.

Pros:

Playing on equal grounds:

If companies pay taxes relative to the quantity of goods sold rather than the value of the certain good, the big companies that sell more pay more taxes and those companies that can’t compete to those larger companies don’t have to pay taxes equal to those large companies.

Government revenue:

Excise taxes give government a lot of revenue. These taxes are place on inelastic goods such as cigarettes and gasoline. These goods are sold a lot in quantity and since excise taxes affect the quantity of goods you sell, these companies pay a lot in taxes to the government.

Control Over the consumption of Goods:

Another reason excise taxes are a good thing is to somewhat control what the people are buying. For example since a large population of the people smoke cigarettes and the government wanted to reduce that percentage they can raise the excise taxes of cigarettes and making people pay more to smoke.

Cons:

Unequal Grounds:

Companies that can sell larger quantity of goods face higher tax rates then of those companies that sell less in quantity.

Increase in Taxes as a whole:

Excise is often somewhat similar to other taxes and sometimes doubles up with them. Since the two taxes largely apply to the same types of goods, people are forced to pay tax twice over on the same items once through excise upon purchase and a second time around through customs duties upon transportation.

Increase tax of Medication:

Legal drugs are subjected to taxation in some countries. This has raised controversy about the fact that this tax leads to hugely inflated prices of ordinary and even potentially lifesaving medication.

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