The term indirect tax has more than one meaning.

In the colloquial sense, an indirect tax (such as sales tax A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale. A portion of the sale may be exempt from the calculation of tax, because sales tax laws usually contain a list of exemptions. Laws governing the tax may, value added tax Value added tax is similar to a sales tax. It is a tax on the estimated market value added to a product or material at each stage of its manufacture or distribution, ultimately passed on to the consumer. Maurice Lauré, Joint Director of the French Tax Authority, the Direction générale des impôts, was first to introduce VAT on April 10, 1954, (VAT), or goods and services tax Value added tax is similar to a sales tax. It is a tax on the estimated market value added to a product or material at each stage of its manufacture or distribution, ultimately passed on to the consumer. Maurice Lauré, Joint Director of the French Tax Authority, the Direction générale des impôts, was first to introduce VAT on April 10, 1954, (GST)) is a tax To tax is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). The intermediary later files a tax return and forwards the tax proceeds to government A government is the organization, or agency through which a political unit exercises its authority, controls and administers public policy, and directs and controls the actions of its members or subjects with the return. In this sense, the term indirect tax is contrasted with a direct tax which is collected directly by government from the persons (legal or natural) on which it is imposed. Some commentators have argued that "a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be."[1]

An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products.[2] Examples would be fuel, liquor, and cigarette taxes. An excise duty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately the manufacturer transfers the burden of this duty to the buyer of the car in form of a higher price. Thus, an indirect tax is such which can be shifted or passed on.

The term indirect tax has a different meaning for U.S. constitutional law purposes. See Direct tax In the general sense, a direct tax is one paid directly to the government by the persons on whom it is imposed (often accompanied by a tax return filed by the taxpayer). Examples include some income taxes, some corporate taxes, and transfer taxes such as estate (inheritance) tax and gift tax. In this sense, a direct tax is contrasted with an; see also Excise An excise or excise tax may be defined broadly as an inland tax on the production for sale; or sale, of a specific good, or narrowly as a tax on a good produced for sale, or sold, within the country. Excises are distinguished from customs duties, which are taxes on importation. Excises, whether broadly defined or narrowly defined, are inland taxes,.

Notes

  1. ^ Britannica Online, Article on Taxation. See also Financial Dictionary Online, Article on Direct taxes.
  2. ^ Financial Dictionary Online, Article on Indirect taxes.

See also

External links

VAT in the UK

Categories: Taxation Categories: Government finances | Public economics | Political economy | Accountancy

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