Consumption Tax Model

A consumption tax model taxes individuals based on what they spend rather than what they earn. When you buy goods or services, a percentage of the price is added as tax. This approach encourages saving and investment since income itself isn't taxed directly, only the final consumption. It simplifies the tax system, reduces incentives to hide income, and can generate steady government revenue. Examples include sales taxes and Value-Added Tax (VAT). Overall, this model focuses on taxing consumption to fund public services while promoting economic activity and savings.