SEARCH THE BUSINESS GLOSSARY levy charged directly on a
specified item or commodity. It may be viewed as an indirect
form of taxation in that it is not contingent upon income but on
consumption of an item. Examples include excise taxes on
cigarettes nd alcohol, and sales taxes. a tax on what people
spend instead of what they earn, such as a sales tax , a Value-
Added Tax (VAT) , or a consumption tax system that, similar to
an Individual Retirement Account (IRA) , excludes from taxation
all income that is saved, then taxes withdrawals from savings.
Advocates of a consumption tax as a replacement for the income
tax favor the consumption tax system approach, arguing that the
gains from additional saving and investment would offset the
higher tax rate necessitated by the removal of saved income from
the tax base. Copyright © 2006, 2003, 1998, 1995, 1991, 1987,
1985 by Barron's Educational Series, Inc. Reprinted by
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