Here are some notes on the meaning of direct and indirect taxes in detail:
- Direct tax: A direct tax is a tax that is levied on the income or property of individuals or businesses. The tax is paid directly to the government by the taxpayer. Examples of direct taxes include income tax, property tax, and wealth tax.
- Indirect tax: An indirect tax is a tax that is levied on goods or services. The tax is paid by the consumer of the goods or services, but it is collected by the seller. Examples of indirect taxes include sales tax, excise duty, and value-added tax (VAT).
Here are some of the key differences between direct and indirect taxes:
- Who pays the tax? Direct taxes are paid by the taxpayer, while indirect taxes are paid by the consumer.
- When is the tax paid? Direct taxes are usually paid once a year, while indirect taxes are paid more frequently, such as every time a purchase is made.
- How is the tax collected? Direct taxes are collected by the government, while indirect taxes are collected by the seller of goods or services.
- How is the tax used? Direct taxes are typically used to fund government programs, such as education and healthcare. Indirect taxes are typically used to fund infrastructure projects, such as roads and bridges.