ad valorem tax

Meaning

A tax levied in proportion to the estimated value of the goods or property concerned. It is commonly used in property tax assessments and import tariffs, where the tax amount scales directly with the asset's assessed value.

Examples

• The municipal government decided to increase the ad valorem tax on luxury real estate properties.

  The municipal government decided to increase the ad valorem tax on luxury real estate properties.

• Imported vehicles are subject to an ad valorem tax based on their declared customs value.

  Imported vehicles are subject to an ad valorem tax based on their declared customs value.

• Unlike flat fees, an ad valorem tax automatically adjusts as the market value of the asset fluctuates.

  Unlike flat fees, an ad valorem tax automatically adjusts as the market value of the asset fluctuates.

• The corporation appealed the high ad valorem tax assessed on its manufacturing facility.

  The corporation appealed the high ad valorem tax assessed on its manufacturing facility.

• Most sales taxes function as a form of ad valorem tax because they are calculated as a percentage of the purchase price.

  Most sales taxes function as a form of ad valorem tax because they are calculated as a percentage of the purchase price.

Common Mistakes

• ✗ The government charged an ad valorem tax fee of fifty dollars on every car.

  ✓ The government charged a flat fee of fifty dollars on every car.

  'Ad valorem' means 'according to value' (a percentage), so it cannot be a fixed, flat-rate dollar amount.

• ✗ We paid an added valorem tax on the shipment.

  ✓ We paid an ad valorem tax on the shipment.

  Do not confuse 'ad' with 'add' or 'added'; 'ad valorem' is a Latin phrase meaning 'according to value'.

Related Expressions

Practice

• Because real estate prices soared, the homeowner faced a significantly higher ___ this year.

  💡 A tax based on the assessed value of property.

  Show answer

  ad valorem tax

• Customs duties on luxury imports are typically structured as an ___ to ensure expensive goods pay higher tariffs.

  💡 Latin term for tax based on value.

  Show answer

  ad valorem tax