An ad valorem tax

Question

An ad valorem tax

Quizplus · Accepted Answer

An ad valorem tax is a tax that is implemented as a percentage of the value of the item being taxed. In the context of international trade, an ad valorem tax on imports would tax the import a certain percentage of its price as it crosses the border, while an ad valorem tax on exports would tax the export a certain percentage of its real value. Option B is incorrect because an ad valorem tax is based on the value of the item being taxed, not its real value. Option C is not accurate as an ad valorem tax does not distinguish between imports based on their contribution to national defense. Option D is also incorrect as a quota is not synonymous with a tax.

An Ad Valorem Tax