- Consumption taxes are a significant source of revenue for governments across the world, making up 32.3 percent of tax revenues in OECD countries in 2019.
- Despite the potential of consumption taxes as a neutral and efficient source of tax revenues, many governments have implemented policies that are unduly complex and have poorly designed tax bases that exclude many goods or services from taxation, or tax them at reduced rates.
- Value-added taxes and sales taxes are ripe for reform to avoid distorting consumption patterns and raise revenue in a stable manner.
- Excise tax revenues tend to be volatile and should be specifically designed to target the societal costs associated with certain products and the revenue used to mitigate negative impacts of taxed activities like smoking and pollution.
- Policymakers should ensure that consumption taxes only apply to final purchases of goods and services and that business inputs are untaxed.
Source: taxfoundation.org
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