A unit tax has an advantage over an ad valorem tax in situations when _____.

Question

Quizplus · Accepted Answer

A unit tax is a fixed amount per unit of the good being taxed, while an ad valorem tax is a percentage of the value of the good being taxed. When it is difficult to estimate the value of the good being taxed, such as with complex products or services, a unit tax can be more effective and less prone to inaccuracies or disputes. Therefore, the advantage of a unit tax over an ad valorem tax is more pronounced in situations when it is difficult to estimate the value of the good being taxed.

A Unit Tax Has an Advantage Over an Ad Valorem