Question

Distinguish between specific and ad-valorem taxes.

Answer 1

SPECIFIC TAXES	AD-VALOREM TAXES
A specific excise tax is levied based on quantity	An ad valorem excise is levied based on the value
It is thus proportional to the particular quantity of a product sold, regardless of its price. Excise taxes, for instance, fall into this tax category.	It is a charge based on a fixed percentage of the product value. Per unit taxes have administrative advantages when it is easy to measure quantities of the product or service being sold.
A specific tax increases the price of all equally and has a bigger effect on reducing overall demand	An ad Valorem tax places a proportionately higher tax on expensive goods. This can encourage consumers to switch from expensive alcohol and expensive cigarettes – to cheaper varieties