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 ?
Indirect taxation in Japan includes excise taxes in addition to the consumption tax.
Businesses typically encounter problems with indirect taxation when the business restructures its trade without considering the indirect tax consequences until after the event.
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".
Targeted to those professionals involved with Indirect taxation, the Journal "tells you the facts, your obligations and how you can comply." Editorial is designed to cover a wide variety of indirect tax issues in various jurisdictions with information on such specific issues as the European VAT law, Australian customs regulations, the U.K.'s stamp duty and sales and use taxes in the U.S.
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.
All these bloomin' speed cams are just indirect taxation. I say, slow down, and put the cameras and the neighbourhood curtain-twitchers now armed with speed cams out of business.
Mr Abrams says: "The politicians' explanation is an attempt to excuse highway robbery by indirect taxation."
Spokesman Ronan Hart said: "Most drivers disagree with the principle of charging to enter cities and see it as yet another form of indirect taxation."
Government revenues are derived from indirect taxation in the form of duty on imports, annual company and bank license fees (there are 590 registered banks), taxes in the tourism sector for hotel rooms and entry and exit taxes, and annual work permit fees for many of the more than 12,000 non-nationals who work here.
Through the Constitution Act of 1867 and several subsequent court decisions, the federal government is responsible for:trade, commerce, and banking; direct and indirect taxation; currency; the postal service; census taking and statistics; national defence; navigation; fisheries; copyright; Native people; citizenship; marriage and divorce; criminal law, and penitentiaries; interprovincial works and undertakings; broadcasting; foreign affairs; control of drugs.
The Commission has experienced difficulty in introducing proposals for direct and indirect taxation, largely because of the impact these proposals have on national sovereignty of member states.
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. It is therefore important to remind the budget makers about a number of direct taxes which were abolished during that period.