Knowra Indirect tax Indirect tax An indirect tax is imposed on goods, services, or transactions, with its economic burden potentially shifting from the person legally liable to another.
Tax incidence : The distribution of a tax’s economic burden among buyers, sellers, and others. It distinguishes the party required to remit an indirect tax from those who bear its cost.
Value-added tax : A consumption tax collected in stages on the value added by businesses, usually with credits for tax paid on inputs. It is a widely used indirect tax designed to tax final consumption without repeatedly taxing business inputs.
Direct tax : A tax imposed directly on a person or organization, commonly on income, profits, or property. Its legal liability is generally tied to the taxpayer rather than a taxed transaction or product.
Government revenue : Income received by a government from taxes, fees, public enterprises, and other sources. Indirect taxes are a major source of public revenue in many countries.
Tax shifting : The transfer of a tax’s economic burden from the party initially liable to another party. It describes how sellers may pass an indirect tax into prices paid by buyers.
Sales tax : A tax charged on the sale of goods or services, commonly collected from the buyer at purchase. It taxes transactions at the point of sale, often unlike a value-added tax collected in stages.
Income tax : A tax imposed on income earned by individuals or organizations. It is a direct tax on earnings, not a charge on spending transactions.
Regressive tax : A tax whose burden takes a larger share of income from lower-income people than from higher-income people. Broad consumption taxes can be regressive when lower-income households spend more of their income on taxable goods.
Price elasticity of demand : A measure of how strongly the quantity demanded responds to a change in price. Demand elasticity helps determine whether buyers can avoid a tax by reducing purchases.
Excise : A tax on particular goods, services, or activities, such as fuel, tobacco, or alcohol. Excises are selective indirect taxes rather than broad taxes on consumption.
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