A luxury tax is a tax on products not considered essential (i.e. luxuries). A luxury tax is similar to a sales tax or VAT, except that it mainly affects the wealthy because the wealthy are the most likely to buy luxuries such as expensive cars, jewelry, etc.

Over time what is viewed as "luxury" might change, but the income that the luxury tax brings in might be viewed as hard to give up by the government. The results is that "ordinary" goods might also be charged with luxury tax. An example of this can be seen with various commodities in the country of Norway, where at the beginning of last century, cars and chocolate were viewed as luxury goods. Thus, additional taxes were levied upon these goods. Today cars and chocolate is by few in Norway considered a luxury, but the luxury taxes on these goods remain.

Taxation

Luxussteuer