Hypothecated tax: Difference between revisions
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The '''hypothecation of a tax''' (also known as the '''ring fencing''' or '''ear marking of a tax''') is the dedication of the revenue from a specific tax for a particular expenditure purpose. [[Hypothecation]] is the pledging of assets. |
The '''hypothecation of a tax''' (also known as the '''ring fencing''' or '''ear marking of a tax''') is the dedication of the revenue from a specific [[tax]] for a particular expenditure purpose. [[Hypothecation]] is the pledging of assets. |
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Hypothecated taxes are often subject to unexpected shortfalls and surpluses. This may create political pressure to adjust the tax, to budget non-dedicated revenues for the purpose in question, or to reallocate surplus funds to other purposes. Examples of hypothecated taxation include the [[Fuel taxes in the United States|gasoline tax in the U. S.]], a tax on [[gasoline|petrol]] which is dedicated to the funding of transport infrastructure. |
Hypothecated taxes are often subject to unexpected shortfalls and surpluses. This may create political pressure to adjust the tax, to budget non-dedicated revenues for the purpose in question, or to reallocate surplus funds to other purposes. Examples of hypothecated taxation include the [[Fuel taxes in the United States|gasoline tax in the U. S.]], a tax on [[gasoline|petrol]] which is dedicated to the funding of transport infrastructure. |
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Revision as of 12:56, 30 October 2011
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The hypothecation of a tax (also known as the ring fencing or ear marking of a tax) is the dedication of the revenue from a specific tax for a particular expenditure purpose. Hypothecation is the pledging of assets.
Hypothecated taxes are often subject to unexpected shortfalls and surpluses. This may create political pressure to adjust the tax, to budget non-dedicated revenues for the purpose in question, or to reallocate surplus funds to other purposes. Examples of hypothecated taxation include the gasoline tax in the U. S., a tax on petrol which is dedicated to the funding of transport infrastructure.
A common example in many European countries is a television licence. Here, all owners of television sets are obliged to pay the government an annual fee to use their televisions. The proceeds of the levy are then used to fund public broadcasting. Another example is a dedicated tax on the private trading of securities (for example, 0.3 cents per dollar traded) used to fund public works programmes directly or to pay the finance costs of such programmes.
See also
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