Indirect tax

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Indirect taxes (such as sales taxes, unit taxes, value added tax (VAT), or goods and services tax (GST)) are taxes collected by an intermediary (such as a retail store) from a person who bears the liabilities the highest economic burden of taxes (such as consumers). The intermediary then submits a tax refund and passes the tax return to the government on return. In this sense, the term tax is not directly contrasted with direct taxes, collected directly by the government of the persons (legal or natural) to whom the tax is levied. Some commentators argue that "direct tax is one that can not be billed by the taxpayer to others, whereas indirect taxes can be."

Indirect taxes can increase the price of goods to raise product prices for consumers. Examples are fuel, liquor, and cigarette taxes. Customs on motor cars paid first by car manufacturers; finally, the manufacturer shifts this task load to the car buyer in the form of a higher price. Thus, indirect taxes are taxes that can be transferred or forwarded. The rate at which the tax burden shifts determines whether taxes are primarily direct or indirect. This is a function of the relative elasticity of the supply and demand of goods or services taxed. Under this definition, even income taxes may be indirect.

The terms indirect tax have different meanings in the context of American Constitutional law: see direct taxes and excise taxes in the United States. In the United States, federal income tax has, since its inception on 1 July 1862, indirect taxes (more excise duty) even though during the 1940s, its application grew from an historical average of about 8% of the population paying it to about 90% of the paying population as a measure to support the war effort.

Video Indirect tax

Features

Implementation of indirect taxes is a policy commonly used to generate tax revenue. Indirect taxes are so called because they are indirectly paid by the end consumer goods and services when paying for the purchase of goods or for the enjoyment of the service. It is broadly based because it is applied to everyone in society whether rich or poor. Because tax costs do not vary by income, indirect taxes include Ad Valorem and Specific Taxes, where Ad Valorem (VAT, GST) is proportional and a certain Tax is assigned. However, indirect taxes can be seen as having a regressive tax effect because it imposes a greater burden (relative to resources) on the poor than on the rich, since both rich and poor pay the same amount of taxes for the consumption of a certain quantity of a certain good. Taxpayers who pay taxes do not bear the tax burden; the burden is transferred to the end consumer. In the case of direct taxes, the taxpayer shall bear the personal tax burden; in the case of indirect taxes, the taxpayer and the tax payer are not the same person.

Maps Indirect tax

Excise

Customs are government taxes intended for the producers and producers of certain goods.

Manufacturers are considered:

1. An entity that produces its own goods.
2. An entity that outsources manufacturing, but manufactures takes its place from its name

To cover this cost, the producer adds it to COGS (cost of goods sold), in which the buyer ends up paying these fees. As such, it is considered an indirect tax.

src: tax.thomsonreuters.com

See also

• Live taxes
• Financial oppression
• Income tax in the United States
• United Kingdom Corporation Tax
• Value Added Tax

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Note

Source of the article : Wikipedia