indirect tax

(redirected from Indirect taxes)
Also found in: Dictionary, Thesaurus, Encyclopedia.

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 ?
Accordingly, when considering the burden of indirect taxes on households, it is necessary to take into account the burden of excise taxes in addition to that of consumption taxes by income class.
The income by imposing indirect taxes on oil and gas was recorded at Rs582 billion while this sector contributed over 42 percent of the total local sales tax collection.
Classifying the amounts collected (under WHT regime) as direct taxes when for all intents and purpose as well as for practical reasons, WHT is quite identical in characteristics to indirect taxes like sales tax, custom duty, etc.
The growth in direct and indirect taxes is reflected in the gross domestic product.
Input tax credits for federal indirect taxes (CENVAT credit): Certain manufacturers and service providers are eligible to claim a credit (called the CENVAT credit) for excise duty paid on specified inputs and capital goods used in the manufacturing process as well as service tax paid on purchased services.
Head of the tax authorities of the EEU and the tax service of Kyrgyzstan signed a protocol on the accession of Kyrgyzstan to the State Tax Service protocol for the exchange of electronic information regarding indirect taxes.
He added: "If you're thinking about collecting more money from people or giving more money back to people, we need to examine that in a more coherent way that includes direct taxes, indirect taxes and social insurance.
He was formerly with Grant Thornton in Birmingham and brings 20 years of experience in VAT and indirect taxes, initially with HMRC and latterly in senior roles at various major accountancy firms.
The impact of fiscal policy on economic activity is larger in downturns than in expansions and capital spending and direct taxes are associated with the largest effects on output, while non-targeted government transfers and indirect taxes are associated with a smaller impact.
About 29% of the typical gross pensioner household income of pounds 20,130 is paid in direct and indirect taxes, equating to pounds 5,864 a year, insurer MetLife found.
Around 29% of the typical gross pensioner household income of pounds 20,130 is paid out indirect and indirect taxes, equating to pounds 5,864 a year, insurer Met-Life found.