A tariff is a duty imposed by a national government, customs territory, or supernational union on imports of goods and is paid by the importer but eventually affects the price paid by the consumer.
A value-added tax (VAT) is a consumption tax that is levied at each stage of a product’s production and distribution and is typically passed on to the consumer.
A sales tax is a tax paid to a government body for the sales of certain goods and services and is paid by the customer.
All of these taxes have one key common characteristic. They are regressive and serve to reduce purchasing power. Investors should realize that reducing purchasing power in a consumption-based economy could have an adverse effect on long-term growth.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA
