Indirect Tax

Topics: Tax, Indirect tax, Value added tax Pages: 2 (836 words) Published: January 28, 2013
Measuring the deadweight cost of a tax system is difficult. You cannot observe all the valuable things that are not made or done but would have been if not for taxes. But economists are clever, and estimates have been made (I will spare you the methodological details). Most put the deadweight cost of raising £1 of tax revenue at between 20 and 50 pence. The dead-weight loss of taxation is the loss of output which would have occurred in the absence of the tax – a loss of economic welfare above and beyond the tax revenues collected. Dead-weight loss is the ultimate stealth tax followed by a few others we could also bring into play but for the purpose of your question generally dead-weight costs (losses) go unnoticed, even by those who pay them, because instead of taking from people what they already have, they take from people what they would have had, but will never get.

Direct tax
The term direct tax generally means a tax paid directly to the government by the persons on whom it is imposed. However, there are other definitions as well, under which taxes paid directly from individuals to the government are not legally classified as direct taxes, as described below. A direct tax is one imposed upon an individual person (juristic or natural) or on property, as distinct from a tax imposed upon a transaction. Indirect taxes such as a sales tax or a value added tax (VAT) are imposed only if and when a taxable transaction occurs; people have the freedom to engage in or refrain from such transactions; whereas a direct tax is imposed upon a person, typically in an unconditional manner, such as a poll-tax or head-tax, which is imposed on the basis of the person's very life or existence, or a property tax which is imposed upon the owner by virtue of ownership, rather than commercial use. 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] A direct tax is one that you have to...
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