Question

State the difference between income tax and expenditure tax.

Answer 1

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.