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 ?
" Now, you pay 17 types of indirect taxes. You pay returns for each of them.
As such, the rise of indirect taxes would lead to an increase in the tax burden on households, and there is concern that the burden will mostly increase among low-income groups, especially the consumption tax.
He has also advised companies and authorities on VAT and indirect taxes in Australia, India, Hungary and Armenia.
We have a combination where there would be existing indirect taxes for one part of the year, and GST for the rest of the year," says Nayar.
Islamabad -- The Pakistan Economy Watch (PEW) on Sunday asked the government to cut direct and indirect taxes on oil and gas and give benefit of reduced oil prices to masses.
It is deducted in the manner in which most indirect taxes are collected, i.e.
indirect taxes, personal income taxation, reforms in transitional countries, and the broad lessons of tax reform efforts; corruption, voice, and accountability in high income countries; the cost of business entry; income inequality and progressive income taxation, pro-poor indirect tax reforms, tax burden, the impact of tax and expenditure policies on income distribution, distribution and poverty impacts on tax structure reform, and the impact of budgets on the poor; and indirect taxes, optimal tax rates and tax design during systemic reform, selective indirect tax reform, border taxes, public funds, and economic recovery and growth.
The paper revealed that indirect taxes occupied dominant position in the total tax revenue mobilized by the central government.
Additionally, taxpayers may be subject to other indirect taxes, such as octroi (an entry tax on goods brought into a state for use) and luxury taxes.
Kyrgyzstan acceded to the protocol on the exchange of electronic information between the tax authorities of the EEU of the sums of the paid indirect taxes, press service of the Tax Service of Kyrgyzstan reported.
The GST will subsume most of the indirect taxes like excise duty and service tax at the central level and VAT and local levies on the states front.
Research by Dr Micheal Collins of the Nevin Economic Research Institute found the poorest 10% in our society pay just over 30% of their income in taxes, mostly in the form of indirect taxes on the things they buy.