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 ?
"We are finding that through the combination of larger and richer disparate data sets and the application of emerging cognitive technologies we can transform the way our clients approach their indirect tax over and underpayment analysis," said Andy Gold, tax innovation partner in the multistate tax services practice, Deloitte Tax LLP.
"Council tax is clearly regressive, income tax and NICs (National Insurance contributions) are significantly progressive, and we should probably think of indirect taxes as being broadly distributionally neutral.
During the seminar, GTA's indirect tax expert, Samy Nasr, explained in a presentation the main characteristics of the excise tax, the goods it covers, the persons responsible for the tax, how to calculate excise tax, exemption and suspension cases, recovery cases, and compliance requirements.
Further, it was also decided in 2011 to close the vacant offices of Indirect Tax Ombudsman.
The increase in tax revenues is due to an improvement in the collection of both direct (+ 14.8% against -5%) and indirect taxes (+13.5% against 3.7%).
Deloitte has admitted Mark Junkin, Michael Camburn, and Bruce Hamilton as Partners in the Indirect Tax Practice, and appointed four new Directors, reflecting the importance that the firm places on fostering and recognising excellence in leadership in its business, and widening the GCC VAT leadership team to address client needs.
Michael has significant indirect taxes experience advising clients on the complexities of doing business internationally across a number of sectors, in particular, the technology and information sectors.
Their mission is "To provide the best end-to-end indirect tax solution on any Oracle ERP platform, always delivering, always innovating." They strive to change the current status quo of indirect tax processing by applying the solution to the problems at source.
Kitching brings with him over 33 years of industry and indirect tax experience which include employment at HM Revenue and Customs as a VAT inspector and leading indirect tax teams within practice at two of the Big4 accountancy practices, said a statement.
Compared to previous statistics generated from the first Deloitte Indirect Tax Client Survey, GCC businesses have shown a turnaround in their views towards VAT.
If every taxpayer in the country were to pay their share of both direct and indirect taxes properly, do you think we would have to do that?
In 1987, during the period of Prime Minister Yasuhiro Nakasone, it was submitted to the Diet as a "new indirect tax" (5% tax rate) in a legislative bill concerning sales taxation that was neither comprehensive nor a "large indirect tax." It was nonetheless withdrawn due to strong opposition from the retail industry.