indirect tax

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Indirect Tax

A tax that is shifted to another person or entity. For example, sales taxes are levied on a seller but are paid by buyers; that is, the government expects sellers to pay the sales tax, but they pass the cost on to their customers. An indirect tax differs from a direct tax like a tax on income or assets, which the person or organization on whom they are levied must pay directly. There is disagreement as to whether a corporate tax is a direct tax or indirect tax.

indirect tax

A tax paid by an entity other than the one on which it is levied. For example, a retail sales tax is collected and remitted to the government by a business even though the tax is ultimately paid by the consumers. Compare direct tax.

indirect tax

a TAX imposed by the government on goods and services (which is incorporated into the product's final price) in order to raise revenues and as an instrument of FISCAL POLICY in managing the economy. The main forms of indirect tax in the UK are VALUE ADDED TAX, EXCISE DUTY and CUSTOMS DUTY. See BUDGET (GOVERNMENT), EXPENDITURE TAX.

indirect tax

a TAX levied by the government that forms part of the purchase price of goods and services bought by individuals (households) and businesses in order to raise revenue and as an instrument of FISCAL POLICY. Examples of an indirect tax are VALUE-ADDED TAX, EXCISE DUTY, SALES TAX and TARIFF.

Indirect taxes are referred to as ‘expenditure’ taxes since they are incurred when income is spent, unlike DIRECT TAXES, such as INCOME TAX, which are incurred when ‘income’ is received.

Changes in indirect tax can be used as part of fiscal policy to regulate the level of AGGREGATE DEMAND, increases in tax serving to reduce disposable income available for consumption spending, while decreases in tax increase disposable income. Indirect taxes can be used to affect the shape of demand as well as its level, increases in indirect tax serving to discourage consumption of socially disapproved products like cigarettes or alcoholic drinks, while reductions in indirect taxes encourage consumption of socially approved products like basic foodstuffs or books.

Unlike a DIRECT TAX, which varies according to the income of the taxpayer (PROGRESSIVE TAXATION), indirect taxes are regressive, insofar as the same amount is paid by each taxpaying consumer regardless of income. See TAXATION, REGRESSIVE TAXATION, INCIDENCE OF TAXATION.

References in periodicals archive ?
For example, if and when they quit they would be relieved of the tax burden on smokers but does that mean they would be free of all indirect taxation on consumables now they are not smokers?
According to the Treasury these figures are wrong and "it is notoriously difficult to measure the burden of indirect taxation on different types of households".
Gordon Brown has been quietly - but very definitely - re-distributing wealth by skilful use of indirect taxation ever since he became Chancellor and using the money to combat child poverty and improve public services.
Fifty per cent more of the money they pay in indirect taxation is now being focused on the health service and they may be happy to pay it.
The imposition of direct taxes is all the more necessary as during 1980s the burden of taxation has not been on the rich but mainly on low income groups through indirect taxation.
However it is the member state most heavily reliant on indirect taxation, i.
Its chief executive, Paul Surridge (right), warned that with an impending General Election, and the likelihood of cuts in public spending and significant increases in both direct and indirect taxation, 2010 will be a testing year for business.
There are also plans to introduce indirect taxation in the next couple of years.
By offering accessible regular public transport, there should be no need to levy another form of indirect taxation.
Commenting on today's announcement, Marvin Rust, Head of the European Tax Advisory practice, said, "Richard has extensive experience in advising large corporates on how best to navigate the complex world of indirect taxation management and compliance, as well as frequent regulatory changes.
CLAYTON Jones (Feedback, February 6) attacks Labour's new 50p income tax policy for those earning more than PS150k, instead arguing for progressive, indirect taxation on luxury items.
This is why the Ministry of Finance is looking at a variety of indirect taxation options, such as a sales tax, and other areas like imposing duties on tobacco products.