A market inspector finds that a café adds a 12% sales tax to meals but a separate 4% tax to sugary drinks. Customers ask why the taxes are included in the f...
Question 1 Report
A market inspector finds that a café adds a 12% sales tax to meals but a separate 4% tax to sugary drinks. Customers ask why the taxes are included in the final price.
(a) State which type of tax is charged on spending by consumers. [1]
(b) Explain why the sugary-drink tax may be used by the government. [1]
Answer Details
(a) A tax charged on consumer spending is an indirect tax. [1] It is added to the price of goods or services, rather than being taken directly from a person's income.
(b) The sugary-drink tax may be used to discourage consumption of sugary drinks, helping to reduce health problems and possible healthcare costs. [1] Raising government revenue is also an acceptable reason.
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