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Question
State the difference between income tax and expenditure tax.
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Solution
| S. No. | Aspect | Income Tax | Expenditure Tax |
| 1. | Tax Base | Based on the income of the individual or corporation. | Based on what an individual or entity spends. |
| 2. | What is Taxed | Earnings include salaries, corporate profits, and investment income. | Amount spent on consumption or specific expenses. |
| 3. | Purpose | Income tax encourages saving and investing. | Encourages savings by taxing spending, not income. |
| 4. | Common Examples | Individual income tax, corporate tax. | Some countries have expenditure taxes like luxury tax. |
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