Ad valorem tax is a type of tax that is based on the value of a good or service. The tax rate is typically expressed as a percentage of the item's value. For example, a sales tax is an ad valorem tax because it is based on the price of the item being sold. Property taxes, tariffs, and excise taxes are also examples of ad valorem taxes. The term "ad valorem" is Latin for "according to value".
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Taxation