Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 216

Under a value-added taxing system:

Answer options

• A. Businesses must pay a tax only if they make a profit.
• B. The consumer ultimately bears the cost of the tax through higher prices.
• C. Consumer savings are discouraged.
• D. The amount of value added is the difference between an organization's sales and its cost of goods sold.

Correct answer: B

Explanation

The correct answer, B, is accurate because in a value-added tax system, businesses typically pass the tax costs onto consumers through increased prices. Option A is incorrect as businesses pay taxes regardless of their profit status. Option C is not relevant as value-added taxes do not inherently discourage savings, and option D, while true in its definition, does not directly address the tax burden on consumers.