Ad Valorem Equivalent (AVE)
Ad valorem tax is a type of tax which is based on the property value of the properties such as real estate or personal property. The most common tax of this type is the real estate tax. This tax sometimes applies to other tax applications such as import taxes.
A Little More on What is Ad Valorem Tax
In Latin, ad valorem means “according to value.” Ad valorem taxes are levied on specific values which are taxable. One of the most common ad valorem tax is the municipal property tax which is frequently evaluated by the state tax consultant to determine its present value. Municipalities and other government agencies impose taxes on owners of real estate based on the estimated value of their properties.
Ad valorem tax is always based on actual assets, calculated and applied each year unlike other taxes such as transaction tax which is only applied during the period of transaction.
Collecting Ad valorem Equivalent (AVE)
Although the municipal government generally imposes the Ad valorem tax, it can also be collected by other municipalities like the county or school district. Real estate owners may face taxation that is imposed by multiple agencies like the counties or the municipalities. Ad valorem tax for municipal assets is referred to as ‘real estate tax,’ and it’s one of the most important sources of revenues for local governments.
Calculating Ad valorem Equivalent Tax Amount
Ad valorem value taxes are typically calculated on the first of January every year. This tax is the proportion of the fair market value of the real estate appraisal. This value is the estimated selling price of the property and includes the transaction between an interested buyer and seller where the seller knows all the essential facts concerning real estate. The deal is not completed, but the fair market value is understood more efficiently at a reasonable price.
Vat is usually applied to real estate and personal assets. Real estate encompasses all the improvements made on the land and the buildings. Ad valorem property tax is levied on important personal assets like the automobiles. Properties such as appliances and clothing are not applied.
References for Ad Valorem Equivalent
Academic Resources for Ad Valorem Equivalent
- Calculation of Ad valorem Equivalents of Non-Ad Valorem Tariffs—Methodology Notes, Stawowy, W. (2001). Division on International Trade in Goods and Services and Commodities, UNCTAD (October). Draft Paper. This paper presents various detailed methods of calculating ad valorem equivalents and non-ad valorem tariffs.
- Ad Valorem equivalent in the WTO, Babili, M. (2009). (No. 48586). This paper argues that for members of WTO to progress in Doha Round negotiations, they should remove the hindrance of how to convert specific tariffs into ad valorem equivalents.
- A meta-analysis of estimates of the impact of technical barriers to trade, Li, Y., & Beghin, J. C. (2017). In Nontariff Measures and International Trade (pp. 63-77). This article gives a meta-analysis of the explanation of the variation in trade effects of the technical barriers to trade broadly defined by using the estimates available from empirical international trade literature and also accounts for the differences in data sampling and methodology.
- Non-tariff barriers in CGE models: How useful for policy? Fugazza, M., & Maur, J. C. (2008). Journal of Policy Modeling, 30(3), 475-490. This study presents research that provides a quantification of non-tariff barriers (NTBs) at the global level. Its primary focus is discussing and questioning various treatments of NTBs in computable general equilibrium models by explicitly applying the global trade analysis project standard model.
- Who pays broad-based energy taxes? Computing lifetime and regional incidence, Bull, N., Hassett, K. A., & Metcalf, G. E. (1994). The Energy Journal, 145-164. This is a paper measuring the incidence of energy taxes by using a lifetime framework to study a BTU tax and a carbon tax.
- Tariff equivalents of nontariff measures: the case of European horticultural and fish imports from African countries, Nimenya, N., Ndimira, P. F., & de Frahan, B. H. (2012). Agricultural Economics, 43(6), 635-653. This is a study estimating ad valorem tariff equivalents of European food safety standards on various imports of key horticultural and fish products from countries such as Kenya, Tanzania, Uganda, and Zambia.
- Notes on detecting the effects of non-tariff measures, Carrère, C., & De Melo, J. (2011). Journal of Economic Integration, 136-168. This paper critically discusses and evaluates the alternative approaches for estimating the effects of non-tariff measures on trade flows.
- Market Access Liberalization in the Doha Round: Scenarios and Assessment, Fontanne, L., Guérin, J. L., & Jean, S. (2005). World Economy, 28(8), 1073-1094. This article argues of the importance of the Doha Development Agenda item of the modalities of negotiation on market access for agricultural and non-agricultural products.
- Non‐Tariff Measures, Specific Trade Concerns and Tariff Reduction, Orefice, G. (2017). The World Economy, 40(9), 1807-1835. A study is presented on this paper of the determinants of the recent proliferation of Specific Trade Concerns that were raised during the meeting of WTO on non-tariff trade measures that focus on the sanitary and the phytosanitary and technical barriers to trade.
- The Impact of the Uruguay Round on Tariff and Non‐Tariff Barriers to Trade in the ‘Quad,’ Daly, M., & Kuwahara, H. (1998). World Economy, 21(2), 207-234. This paper investigates how in the past 50 years, the multilateral trade negotiations round under the General Agreement on Tariffs and Trade have been focusing mainly on the liberalization of trade in goods.
- Non-tariff measures, preferential trade agreements, and prices: new evidence, Cadot, O., & Gourdon, J. (2016). Review of World Economics, 152(2), 227-249. By section of the Harmonized System of product classification, this study estimates the average ad-valorem equivalents for sanitary and phytosanitary, technical-barriers-to trade and other measures and also combines a new dataset of non-tariff measures in 65 countries that have the CEPII’s unit values database.