Every country is applying different types of taxes with the context of the country, though the tax types that applied by government & states are still debating with their rationality, rate or percentage levied to employees, problem of double taxation, subjectivity in tax-holiday or exemption, … etc, the consequences became a devastating problem to poor nations and to those categorized under low & middle income groups. For instance, the employment tax rate or income tax that applies to some developing countries employees and collected by the government would be considered as a huge cost for individual tax payer as it affects seriously on daily spending and led to inability to make a personal saving. Reconsidering this type of tax in one side will be important in order to bridge the gap between the rich & poor people, however on the other side applying certain type of taxes; like, Tax on Luxury Goods or Items that shall be levied on using those luxury items will also have a valuable contribution in society welfare.
In this regard, different countries already applied such type of taxes to overcome some challenges or problems, we can refer these links:
https://en.wikipedia.org/wiki/OECD
https://www.canada.ca/en/services/taxes/excise-taxes-duties-and-levies/luxury-tax/luxury-tax-registration.html
https://en.wikipedia.org/wiki/Luxury_tax_(sports), which applies to sport.
To my view, the luxury goods tax will not have a direct connotation with excise taxes as it will apply in using such luxury goods; like, expensive or luxury cars, houses, jewelry, personal jet, … etc, and would not be levied on sale or importation of such items.
For instance, in Ethiopia context many people are owning and using expensive or luxury items; like car or houses whereas a large percentage of the population are still struggling to get daily bread, living in house less condition that indicates to live in poverty line and some can be categorized in middle income group. These became common in most poor countries and least developed countries (LDC),
https://www.un.org/ohrlls/content/ldc-category#:~:text=Least%20Developed%20Countries%20Category&text=The%20United%20Nations%20defines%20LDCs,structural%20impediments%20to%20sustainable%20development.
To make more real, for example if you need to buy VW new brand car, Toyota, Nissan, Mercedes, BMW, V8, or other expensive cars you should spend a minimum of 4 Million Ethiopian Birr (approximately $69,000), or owning & using luxury house at least you spend 30 Million Ethiopian Birr (approximately $517,242 at prevailing exchange rate).
If we set an annual tax rate of 10% on using of such car & 20% tax rate on using a house, it will have a great contribution to a country if government takes responsibility to adapt fair income distribution and bridge income gaps so that it may use as a subsidy to poor nations. These can be just an indication; however different measures can be applied to overcome the daunting challenges; especially in LDC countries, otherwise the income gap becomes more broaden and people are suffering in their life.
Any views welcome for the concern of poor nations & developed countries scholars expertise are also valuable.
The states strives balance expenditures, savings and income cuts through implemented policies. The state most important purpose be to ensure balance in the luxury consumption. A correct taxation on luxury consumption goods will have a positive effect on income distribution.
Taxation on luxury goods or items is a common practice employed by governments around the world for various reasons:
Revenue Generation: One of the primary purposes of taxing luxury goods is to generate revenue for the government. Luxury items typically have higher profit margins, and imposing taxes on them can contribute significantly to government coffers.
Redistribution of Wealth: Taxing luxury goods can be seen as a way to redistribute wealth in society. By taxing high-end products, governments can collect revenue from those who can afford to spend more, and potentially use that revenue to fund programs that benefit lower-income individuals or address socioeconomic disparities.
Addressing Economic Inequality: Taxing luxury goods can also serve as a tool for addressing economic inequality. It can help prevent the concentration of wealth among a small segment of the population by reducing the purchasing power of the affluent and redistributing resources more equitably.
Promoting Social Responsibility: Taxation on luxury items can also be motivated by social or ethical considerations. Governments may choose to tax certain luxury goods, such as items associated with excessive consumption or environmental harm, as a way to discourage their consumption and promote more responsible consumer behavior.
Protection of Domestic Industries: In some cases, governments may impose taxes on luxury goods to protect domestic industries from competition with imported luxury products. By making imported luxury items more expensive through taxation, governments can support local manufacturers and businesses.
It's important to note that the definition of "luxury goods" and the specific items subjected to luxury taxes can vary widely between countries and jurisdictions. Additionally, the effectiveness and impacts of luxury taxes depend on various factors, including the design of the tax policy, consumer behavior, and market dynamics.
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