What is a significant characteristic of consumption tax?

A significant characteristic of a consumption tax is that it is regressive but only paid when goods or services are consumed. This type of tax typically takes a larger percentage of income from low-income individuals compared to those with higher incomes, as poorer households tend to spend a higher share of their income on consumption. The regressive nature of the tax means that as individuals' income rises, they spend a smaller proportion of their income on taxable consumption, leading to a heavier tax burden for those with less income.

Moreover, a consumption tax is designed to only be levied at the point of sale when a purchase is made, making it distinctive compared to taxes that may be assessed on income or property. This principle emphasizes the idea that individuals are taxed based on their purchasing behavior rather than their earnings or accumulated wealth, which is a fundamental aspect of how consumption taxes function in various jurisdictions.