Ad Valorem Taxation

Ad valorem taxation is a tax based on the value of a property, goods, or services. The term is Latin for "according to value." This means that the tax amount increases as the value of the item increases. For example, property taxes are often ad valorem, calculated as a percentage of the property's assessed value. Similarly, sales taxes can also be considered ad valorem, as they are a percentage of the sale price of goods or services. This approach ensures that individuals or businesses pay taxes proportionally to their economic value.