indirect tax

Public finance
This article is part of the series: Finance and Taxation
Taxation
Income tax · Payroll tax CGT · Stamp duty · LVT Sales tax · VAT · Flat tax Tax, tariff and trade Tax haven · Property tax
Tax incidence
Tax rate · Proportional tax Progressive tax · Regressive tax Tax advantage · Fixed tax Excess burden of taxation
Taxation by country Australia • British Virgin Islands Canada • China • Colombia France • Germany • Hong Kong India • Indonesia • Ireland Netherlands • New Zealand Peru • Russia • Singapore Switzerland • Tanzania Thailand • United Kingdom United States • European Union v • d • e Tax rates around the world Tax revenue as % of GDP
Economic policy
Monetary policy Central bank • Money supply Gold standard
Fiscal policy Spending • Deficit • Debt
Policy-mix
Trade policy Balance of trade Tariff • Trade agreement
Finance
Financial market Financial market participants Corporate · Personal Public · Regulation
Banking
Fractional-reserve · Full-reserve Free banking · Islamic banking Deposit insurance
view • talk • edit • project

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

See also

• Direct tax
• United Kingdom Corporation Tax
• Income tax in the United States
• Value Added Tax

External links

VAT in the UK