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 ?
The richest tier saw the proportion they spent on indirect taxes rise from 12% to 13%, or pounds 8,339 out of disposable incomes worth pounds 63,890.
Ibn Khaldun distinguishes between direct and indirect taxes.
2], also influences significantly and positively the buoyancy of the indirect taxes.
The value-added tax (VAT) and selective taxes (on energy, alcohol and tobacco) are indirect taxes paid by households via higher purchasing prices of these items.
As for indirect taxes there is a great emphasis on the sales tax.
In this study all the indirect taxes except export duties, a component of customs duties, are covered.
Proposed as the successful bidder must certify, prior to the date of execution of the contract (10 working days from the date of notification of award), the constitution of the Tender Guarantee for an amount equivalent to five percent (5%) of contract award amount, excluding indirect taxes.
The Government has deferred the roll-out for a Direct Taxes Code till 2011 but the Goods and Services Tax, which is the proposed reform in indirect taxes, will be released with the beginning of the next financial year in April, 2010.
WTO rules treat direct taxes (income taxes) differently from indirect taxes (such as value-added taxes).
It is these indirect taxes which hit those of us who are not well-off the hardest.
Transfer pricing can be a problem once a taxable presence is established and indirect taxes such as sales/use, employment, VAT, and customs consequences should be evaluated, Ms.
A well-known conclusion in the theory of international trade is that having tariffs is not an optimal policy for a small country unable to influence terms of trade if collection costs of taxes can be disregarded and lump-sum taxes or indirect taxes on all commodities are possible.