Tax And Price Index - TPI

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DEFINITION of 'Tax And Price Index - TPI'

A measure of the percentage that a consumer's income would have to adjust by in order to maintain the same level of purchasing power. The tax and price index (TPI) takes into account changes in retail prices due to inflation, as well as changes to direct taxes that reduce a consumer's disposable income. The index uses data collected in the United Kingdom.

INVESTOPEDIA EXPLAINS 'Tax And Price Index - TPI'

Unlike the retail price index (RPI), which uses changes in retail prices only, the TPI also takes into account other factors that affect real disposable income, namely taxes. An increase in both direct taxes and the price of retail goods would require a consumer's income to increase by more than an increase in retail prices alone. If direct taxes, such as income taxes, are reduced while the price of retail goods increases, the RPI will show a greater increase than the TPI.

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