Luxury Tax

A tax placed on products or services that are deemed to be unnecessary or non-essential. This type of tax is an indirect tax in that the tax increases the price of the good or service and is only incurred by those who purchase or use the product.

The term has remained even though many of the products that are assessed with luxury taxes today are no longer seen as "luxuries" in the literal sense. Today's definition leans more toward "sinful" items, such as tobacco, alcohol, jewelry and high-end automobiles. They are implemented as much in an attempt to change consumption patterns as to collect tax revenues.

Luxury taxes can also be called "excise taxes" or "sin taxes".

Luxury taxes were often imposed during times of war to increase government revenues, or as a way to get more tax revenue from the ultra-wealthy. Even though some people complain about the preservation of luxury taxes today, the vast majority of people and lawmakers don't mind charging extra fees for the use of these ancillary-type products consumed by a minority of the population.

There is much debate over whether levying luxury taxes does more harm than good. For example, who is most harmed by a luxury tax placed on an expensive car - the buyer, who presumably has money to spare, or the middle-class worker who builds the car only to see sales fall when the luxury tax curbs demand? In the late 1980s, Canada attempted a large luxury tax on cigarettes, only to find that a substantial and violent black market soon formed to supply smokers. Legal sales (and tax revenues) fell, while more money had to be re-routed to stop the criminal activity.


Investment dictionary. . 2012.

Look at other dictionaries:

  • luxury tax — ➔ tax1 * * * luxury tax UK US noun [C or U] TAX ► a tax on expensive goods that are not necessary but are bought for pleasure: a luxury tax on sth »The government is considering imposing a luxury tax on jewellery …   Financial and business terms

  • luxury tax — lux·u·ry tax n: an excise levied on the purchase of items that are not essential for support or maintenance Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 …   Law dictionary

  • Luxury tax — For the special case of the term luxury tax applied to the salaries of athletes, see Luxury tax (sports) A luxury tax is a tax on luxury goods products not considered essential. A luxury tax may be modeled after a sales tax or VAT, charged as a… …   Wikipedia

  • luxury tax — a tax on certain goods or services not considered essential and usually relatively high in price. [1900 05] * * * luxury tax, a tax put on the sale, manufacture, purchase, or use of luxury goods and services …   Useful english dictionary

  • luxury tax — tax imposed on non essential goods and services …   English contemporary dictionary

  • luxury tax — a tax on certain goods or services not considered essential and usually relatively high in price. [1900 05] * * * Excise levy on goods or services considered to be luxuries rather than necessities (e.g., jewelry and perfume). Luxury taxes may be… …   Universalium

  • luxury tax — / lʌkʃəri tæks/ noun an extra tax levied on luxury goods …   Dictionary of banking and finance

  • luxury tax — noun Any tax on the sale of items not considered to be essential to a reasonable standard of living; either to increase revenue, or to discourage the use of certain articles …   Wiktionary

  • luxury tax — Fin a tax on goods or services that are considered nonessential …   The ultimate business dictionary

  • luxury tax — Generic term for excise imposed on purchase of items which are not necessaries; e.g. tax on liquor or cigarettes …   Black's law dictionary

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