Concept:An ad valorem tax is a tax calculated as a percentage of the value of a commodity.
Explanation:The term “ad valorem” is Latin for “according to value.”
This means the tax amount increases or decreases based on the value of the item being taxed.
It is not fixed per unit; instead, it is charged as a proportion of the commodity’s price or worth.
For example, a
5% ad valorem tax on a commodity valued at
200 will be
10, while the same tax on a commodity valued at
500 will be
25.
Therefore, the tax is imposed on the value of the commodity, not merely on exports, imports, or only special commodities.
Answer:C. The Value of a Commodity