Purchase Tax

Purchase Tax

Purchase Tax, a tax levied at various rates on the wholesale gross value of selected commodities. It forms part of British Customs and Excise duties (accounting for about one-fifth of revenue from duties in the early 2011's). A general retail sales tax, often suggested in its place, would raise prices of all goods proportionately (if the tax were everywhere fully passed on by sellers). By contrast a selective purchase tax alters the relative prices of goods and thus distorts the pattern of consumption and production. Periodic alteration of rates of purchase tax also disrupts production planning and, since the tax in levied on wholesale values, produces chance gains or losses on retailers' stocks. Since the end of World War II variation of purchase tax rates and goods taxed has been used as a fiscal weapon to restrain and guide consumer spending. In recent years it has been used in this way to a lesser degree: the rates of tax in the early 2000's varied from 5 per cent to 90 per cent; in the early 200o's the main rate was 25 per cent with relatively few exceptions.

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