Indirect tax: Difference between revisions
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An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products.<ref>''Financial Dictionary Online'', Article on [http://financial-dictionary.thefreedictionary.com/Indirect+taxes Indirect taxes].</ref> Examples would be fuel, liquor, and cigarette taxes. An excise duty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately the manufacturer transfers the burden of this duty to the buyer of the car in form of a higher price. Thus, an indirect tax is such which can be shifted or passed on. |
An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products.<ref>''Financial Dictionary Online'', Article on [http://financial-dictionary.thefreedictionary.com/Indirect+taxes Indirect taxes].</ref> Examples would be fuel, liquor, and cigarette taxes. An excise duty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately the manufacturer transfers the burden of this duty to the buyer of the car in form of a higher price. Thus, an indirect tax is such which can be shifted or passed on. |
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In the early years of the United States, there was strong opposition to the federal government levying direct taxes. As a result, the government resorted to tariffs, an indirect tax. |
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The term indirect tax has a different meaning for U.S. constitutional law purposes. See [[Direct tax]]; see also [[Excise]]. |
The term indirect tax has a different meaning for U.S. constitutional law purposes. See [[Direct tax]]; see also [[Excise]]. |
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Revision as of 00:51, 22 September 2009
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The term indirect tax has more than one meaning.
In the colloquial sense, an indirect tax (such as sales tax, value added tax (VAT), or goods and services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the customer). The intermediary later files a tax return and forwards the tax proceeds to government with the return. In this sense, the term indirect tax is contrasted with a direct tax which is collected directly by government from the persons (legal or natural) on which it is imposed. Some commentators have argued that "a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be."[1]
An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products.[2] Examples would be fuel, liquor, and cigarette taxes. An excise duty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately the manufacturer transfers the burden of this duty to the buyer of the car in form of a higher price. Thus, an indirect tax is such which can be shifted or passed on.
The term indirect tax has a different meaning for U.S. constitutional law purposes. See Direct tax; see also Excise.
Notes
- ^ Britannica Online, Article on Taxation. See also Financial Dictionary Online, Article on Direct taxes.
- ^ Financial Dictionary Online, Article on Indirect taxes.