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 ?
They also conclude that a more comprehensive and uniform system of indirect taxation, as well as the application of a single VAT rate to a wide range of goods would be preferable to the current situation.
Poad is a nationally recognized expert of indirect taxation and speaks frequently on the topic to national tax conferences and symposia.
The winner will be announced at the Indirect Taxation Awards Dinner, sponsored by The Chartered Institute of Taxation, which is being held at The Law Society in Central London on Thursday, October 11.
Businesses typically encounter problems with indirect taxation when the business restructures its trade without considering the indirect tax consequences until after the event.
Depressingly, it is likely we haven't seen the worst of it yet as every aspect of life becomes more expensive - fuel, food and personal and indirect taxation.
It is old fashioned conservatism to wish to cut income tax and, therefore, leave workers with more money in their pocket and use indirect taxation as a way of raising revenue.
and some Latin American nations are turning to indirect taxation, either by establishing VAT or GST taxes or raising existing VAT or GST taxes.
The cabinet lists as reason for the withdrawal the current work on new legal changes that would introduce indirect taxation on insurance premiums similarly to other countries in the EU.
With an impending General Election, and overtures from all parties for deep cuts in public spending and significant increases in both direct and indirect taxation, 2010/11 may well be a testing time for both businesses and consumers alike.
By offering accessible regular public transport, there should be no need to levy another form of indirect taxation.
Nonetheless, EREC Policy Director Oliver Schafer talks of the current system being a "perverse incentive" for energy consumption and calls for a "level playing field" in the field of indirect taxation.
From indirect taxation point of view there were also a number of changes to the rate of VAT applied to certain "green" products.