Expenditure Tax

Expenditure Tax

Expenditure Tax, a tax on personal expenditure. Its advocates claim it would be more equitable than income tax because it would tax all moneys spent (including capital) and not merely income, and thus tend to equalize purchasing power more than does income tax. Taxpayers would be assessed directly (as with the existing income tax). The basis of assessment would be: initial balance of cash, etc., plus receipts during the year, minus end-of-year balance and any investments made during the year. Since it would be a direct tax its rate could be adjusted to the scale of expenditure in similar manner to income tax. It would, however, be difficult to administer, particularly if levied on payments for services. It would have to be comprehensive if a low rate were levied, and this would mean taxing food, which accounts for nearly one-third of personal consumer expenditure in the U.K. A possible alternative to an expenditure tax would be the general inclusion of capital gains as part of taxable income.

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