In the modern free world, maximum taxes are collected through fair taxation systems such as progressive tax systems. There is one system, however, which you may not have heard of, and that is regressive tax. This system is one of the oldest systems and is a cousin of flat tax. If I may be frank, regressive tax, as the name suggests, is a bit meaner than flat tax, however, certain cases makes its use inevitable. The following paragraphs will take you through the definition, mechanism and examples of this taxation system. Definition and Concept Regressive tax is a tax where the rate of tax increases as the subject of tax goes on decreasing and the rate goes on decreasing as the subject of tax goes on increasing. Sounds really unfair, does it not. This kind of system for income taxes is well beyond imagination. Regressive tax is however, not imposed on income. So if you look at it, a regressive tax is necessarily, the exact opposite of progressive tax, which is much fairer in nature and goes easy on several taxpayers. The explanation in the second paragraph, talks about the fields or taxes, where such a system is used. In today's world, this taxation system is used for promotional purposes such as more use of eco-friendly products reduces tax liability. With effect this taxation system promotes and also instigates some really good reforms. Apart from a promotional measure, the multi-point taxation incidence, sale of unethical but legal products, things that are deemed unfit and pose a small amount of threat to the society, are subject to regressive tax. The mechanism of this taxation system is same as before, that is, the tax rate is imposed as per the subject. Here is an example. Please note that the example is hypothetical. X is a company producing high-grade propane, an eco-friendly fuel. For every 10 cans of propane sold, the company would be charged 15% tax per can, till it reaches a limit of 5,000 cans. After this limit the tax imposed would be 11% per can till the company reaches the 7,500 cans. After this limit, a tax of 7.5% would be levied per can. Examples of Regressive Taxation There are some common examples that can be described for explanation. In fact we come across some of these taxes almost every day. So here goes...

• Sin Tax: Sin tax is commonly levied for several vices such as tobacco and high alcohol level drinks. The governments prefer to shield their societies from such vices, hence the taxes that are imposed on smaller and initial volumes of these items are extensive and the rates are huge. The later levels of consumption volumes however, have lesser rates for taxation.
• Value Added Tax: The Value Added Taxes (VAT) is levied after the completion of each stage in the production of an item. For example, petroleum from oil wells is drilled out, which is sent to refinery, where products of fractional distillation process are sold to companies who process it into multiple products. These are then sold to other vendors for delivery to the public. In such a case, the owners of the oil wells pay the maximum rate of tax. However the vendors pay the minimum tax rate.
• Payroll Taxes: Some economies, especially the ones that are pro-socialist in nature, have regressive payroll taxation system. In such cases, the payroll taxes contribute to insurance and some welfare program. The rate goes on decreasing as per the increasing income.

As mentioned above, this taxation is not for income tax. It is a tax to promote good and better changes in society.