“Ad valorem” is a Latin term that means “according to value”. It is frequently used in the context of taxes and duties, referring to a tax or duty that is based on the value of a transaction or the assessed value of a product. This is different from taxes that are fixed or based on quantity.
For instance, an ad valorem tax on imported goods could be a percentage of the goods’ declared value. In the case of property taxes, an ad valorem tax is based on the assessed value of the property.
Ad valorem taxes are prevalent in various jurisdictions and are employed to generate revenue for governments. They can be applicable to a broad range of transactions and properties, and the specific calculation methods can differ depending on local laws and regulations.