What is an Expenditure Tax?

Expense tax is also called "consumption expenditure tax", "comprehensive consumption tax" or "personal expenditure tax". It is a tax levied on the individual's consumption expenditure within a certain period of time. Its theoretical assumptions can be traced back to Hobbes in England in the 17th century, and its most elaborate expositions are modern British economist Kaldor and American economist Masgrave. They believe that: Compared with ordinary commodity tax and income tax, expenditure tax is more in line with the "benefit principle" and "tax ability principle", and it has a unique role in encouraging savings and investment. ^[1]

Expenditure tax

discuss

Expense tax is also called "consumption expenditure tax", "comprehensive consumption tax" or "personal expenditure tax". It is a tax levied on the individual's consumption expenditure within a certain period of time. Its theoretical assumptions can be traced back to Hobbes in England in the 17th century, and its most elaborate expositions are modern British economist Kaldor and American economist Masgrave. They believe that: Compared with ordinary commodity tax and income tax, expenditure tax is more in line with the "benefit principle" and "tax ability principle", and it has a unique role in encouraging savings and investment. ^[1]

Chinese name

Expenditure tax

Category

Levy of various specific expenses

Including

Production, distribution, investment

Generally refers only to

Consumption expenditure tax

definition

The specifics mentioned here include expenditures on production, distribution, investment, and consumption. As far as expenditure tax is concerned, it generally refers only to consumption expenditure tax. Consumption expenditure taxation is based on the total consumption expenditure of an individual within a certain period of time. Personal consumption expenditure tax is an idea proposed by bourgeois economists in view of the shortcomings of personal income tax. They believe that the object of personal income tax is the entire income of the individual, regardless of whether the income is spent. If the personal income is not used for consumption and the savings part is also taxed, it is not conducive to encouraging savings. Because savings are the source of investment, it is also not conducive to investment. Therefore, if personal income tax is changed to personal consumption expenditure tax, it will help restrain consumption and encourage savings and investment. Before the Second World War, famous economists such as Marshall in the United Kingdom and Fisher in the United States had put forward the idea of implementing a consumer expenditure tax. Due to the many difficulties in implementing the consumption expenditure tax and its shortcomings in restraining consumption, it has not been put into practice. ^[2]