Which phrase best defines the ad valorem system of taxation?

A. the assessed value of the company that makes each item being taxed

B. the assessed value of natural substances in each item being taxed

C. the assessed value of labor costs for each item being taxed

D. the assessed value of each item being taxed

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Natasha

28 January, 06:44

Which phrase best defines the ad valorem system of taxation?

A. the assessed value of the company that makes each item being taxed

B. the assessed value of natural substances in each item being taxed

C. the assessed value of labor costs for each item being taxed

D. the assessed value of each item being taxed

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Payton Pittman · Answer 1

The correct answer is D.

An ad-valorem tax is a tax in which the amount due depends on the value of an item exchanged in a transaction or on the value of an underlying property.

The most representative example is the valued-added tax (VAT), in which the amount due is a percentage of the total value of the good purchased and it is paid simultaneosly when the good is bought. A property tax is also ad-valorem but needs to be paid periodically, for instance, anually.