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The term indirect tax has more than one meaning. In the colloquial sense, an indirect tax (such as sales tax, a specific 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 consumer). 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. • Charge levied by the State on consumption, expenditure, privilege, or right but not on income or property. Customs duties levied on imports, excise duties on production, sales tax or value added tax (VAT) at some stage in productiondistribution process, are examples of indirect taxes because they are not levied directly on the income of the consumer or earner. Since they are less obvious than income tax (because they don't show up on the wage slip) politicians are tempted to increase them to generate more state revenue. Also called consumption taxes, they are regressive measures because they are not based on the ability to pay principle.
• A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. An indirect tax is most often thought of as a tax that is shifted from one taxpayer to another, by way of an increase in the price of the good. Fuel, liquor and cigarette taxes are all considered examples of indirect taxes, as many argue that the tax is actually paid by the end consumer, by way of a higher retail price. Indirect taxes can also be defined as fees that are levied equally upon taxpayers, no matter their income. This is a primary reason why they are thought of as taxes that are passed on, as the price of the tax is compensated for by simply increasing the overall price of the good or service. Some economists argue that

at the point of purchase by the end consumer. With the VAT. by this stage of its manufacture or distribution. . it is a tax only on the value added to a product. Tariff. The purpose of VAT is to generate tax revenues to the government similar to the corporate income tax or the personal income tax. the tax is collected and remitted to the government only once. In the same vein. Value-added tax (VAT) is most often used in the European Union. or service. is popularly understood as Customs duty. remittances to the government. • A type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale. From the perspective of the buyer. collections. material. The value added to a product by or with a business is the sale price charged to its customer. The amount of value-added tax that the user pays is the cost of the product. minus the cost of materials and other taxable inputs. and retains the rest for themselves to offset the taxes they had previously paid on the inputs. It differs from the sales tax in that. it is a tax on the purchase price. A VAT is like a sales tax in that ultimately only the end consumer is taxed. The manufacturer remits to the government the difference between these two amounts. less any of the costs of materials used in the product that have already been taxed. it is also a kind of consumption tax. In economic sense. • A value added tax (VAT) is a form of consumption tax. From that of the seller. and credits for taxes already paid occur each time a business in the supply chain purchases products.indirect taxes lead to an inefficient marketplace and alter market prices that don't match their equilibrium price. Duties levied by the government in relation to imported items is referred to as import duty. • Customs duty is a kind of indirect tax which is levied on the import and export of goods of international trade. from an accounting point of view. duties levied on export consignments is called export duty. with the latter. which is actually a list of commodities along with the leviable rate (amount) of Customs duty.

This tax is used to raise state revenue. An intermediary. Excises are distinguished from customs duties. An indirect tax charged on the sale of a particular good.Ad Valorem: A fixed percentage is charged on a particular good. Excise taxes are considered an indirect form of taxation because the government does not directly apply the tax. Customs duty is based generally on the value of goods or upon the weight. • 1. 2. tariff. meaning that the producer or seller who pays the tax to the government is expected to try to recover or shift the tax by raising the price paid by the buyer. . Excises are inland taxes. in case of automobiles). This penalty is assessed by and paid to the Internal Revenue Service (IRS). Also referred to as customs duty. or some other criteria of the item (such as the size of the engine. A penalty tax applied to ineligible transactions in retirement accounts. whereas customs duties are border taxes. An excise is considered an indirect tax. on exports) by the customs authorities of a country to raise state revenue. of specific goods or a tax on a good produced for sale. within a country or licenses for specific activities. which are taxes on importation.• A tax levied on imports (and. It is based on the value of goods called ad valorem duty or the weight. import tax and import tariff. These taxes can be categorized in two ways: . dimensions. or other criteria of the item such as its size. or production for sale. or sold. is charged and then must pay the tax to the government. dimensions. • An excise or excise tax (sometimes called a duty of excise special tax) is an inland tax on the sale. • A tax collected on imports and some exports by the customs authorities of a country. either the producer or merchant. and/or to protect domestic industries from more efficient or predatory competitors from abroad. • 1. sometimes.

Here are some examples of situations in which excises taxes are charged on transactions in retirement accounts: . .Specific: A fixed dollar amount dependent upon the quantity purchased is charged.A 50% excise tax applies to required minimum distribution amounts not withdrawn by the applicable deadline (referred to as an excess-accumulation penalty).5. 2. qualified plan or 403(b) account that occur before the participant reaches age 59. .A 6% excise tax applies to excess IRA contributions that are not corrected by the applicable deadline..A 10% excise tax applies to distributions from an IRA. .