MACRO ECONOMICS

1.TAX :
a) MEANING
b) DEFINITION
2. TYPES OF TAXES:
a) DIRECT TAX
b) INDIRECT TAX
3. DIRECT TAX:
a)MEANING
b)DEFINITION
c)TYPES
d) ADVANTAGES AND DISADVANTAGES
4. INDIRECT TAX:
a)MEANING
b)DEFINITION
c)TYPES
d) ADVANTAGES AND DISADVANTAGES
5.COMPARISION OF DIRECT TAX AND INDIRECT TAX
 MEANING:
Taxes are involuntary fees levied on individuals or corporations and
enforced by a government entity - whether local, regional or national - in
order to finance government activities.
In economics, taxes fall on whomever pays the burden of the tax,
whether this is the entity being taxed, like a business, or the end consumers
of the business's goods.

DEFINITION :
1. According to Adam Smith, the tax which an individual has to pay should
be certain, not arbitrary.

2. According to Bastable “defined a tax is a compulsory contribution of the

wealth of a person for the service of public power”.
MEANING:
A direct tax is generally a tax paid directly to the government by the
person on whom it is imposed. In a general sense, a direct tax is one imposed
upon an individual person (juristic or natural) or property (i.e. real and
personal property, livestock, crops, wages, etc.) as distinct from a tax imposed
upon a transaction.

DEFINITION :
ACCORDING to Dalton “That a direct tax is really paid by a person on
whom it is legally imposed while an indirect tax is imposed on one person but
paid partly or wholly by another owning to consequential change in the terms
of some contract or bargaining between them”
1. Income tax:
It is based on one’s income. A certain percentage is taken from a worker’s salary
depending on how much he earns. The good thing is that the government is also keen
on listing credits and deductions that help lower one’s tax liabilities.

2. Transfer taxes:
The most common form of transfer taxes is the estate tax. Such tax is levied on the
taxable portion of the property of a deceased individual, including trusts and financial
accounts. A gift tax is also another form wherein a certain amount is collected from
people who are transferring properties to another individual.

3. Entitlement tax:
Such type of direct tax is the reason why people enjoy social programs like Medicare,
Medicaid, and Social Security. The entitlement tax is collected through payroll
deductions and is collectively grouped as Federal Insurance Contributions Act.

4. Property tax:
Property tax is charged on properties like land and buildings and is used for
maintaining public services like the police and fire departments, schools, and libraries,
as well as roads.

5. Capital gains tax:

Such type of tax is charged when an individual sells assets such as stocks, real estate, or
business. The tax is computed by determining the difference between the acquisition
amount and the selling amount.
1.Economy
2. Equity
3.Civic consiquence
4.Reduction in inequlity
5.Certainity
6.Elasticity
7.Educative value
8.Easy to understand
1.Inconvenience
2.Unpopular
3.Uneconomical
4.Narrow in scope
5.Not Suitable to underdeveloped economics
6.Only political decision
Meaning:
Indirect taxes are basically taxes that can be passed on to another entity
or individual. It is usually imposed on individuals .It is usually imposed
on manufacturer or supplier
Exmaple: Excise duty on cigreetes and Alcohal

Definition:
Indirect tax is policy commonly used to generate tax the revenue Indirect
tax is also called as it is paid indirectly by the final consumer of goods
and services while paying for purchasing of goods or for enjoying the
services.
1. Sales tax
Goods such as household items, clothing, and other basic commodities are subject to such type
of taxes. Up on payment at the counter, the final sale price is padded with a sales tax that the
store collects and pays to the government.

2. Excise tax
Excise tax is also very common. When a manufacturer buys the raw materials for the company’s
products, say tobacco for cigarette companies, he already needs to pay indirect taxes on the
items. Though a part of the normal course of business, the manufacturer can pass on the burden
to the consumers by selling the cigarettes at a higher price.

3. Customs tax
Ever wonder why imported products are expensive. It is because of customs tax. When a
container filled with bananas from another country enters the US, the importer pays indirect tax
(customs tax), which he then passes on to the consumers.

4.Service Tax
A sales tax the service tax is also summated to the price of the product sold in the country. It is
not charged on goods but on the companies that offer services and once. Every quarter or every
month it is collected on the way services are offered.

5. VAT
SL.NO CONTEXT DIRECT TAX INDIRECT TAX
01. IMPOSITION Imposed on income and Imposed on goods and
Profits services
02. TAX PAYER Individuals, HUF’S, Firms, End consumer of goods and
and companies services
03. APPLICABALIT Applicable to the tax payer Applicable to every stage of
Y alone the production disturbition
chain
04. TAX BURDEN The burden falls dirtectly on The burden is shifted to
the individual consumer by service provider.

05. TRANSFER Cannot be transferred to It can be transferred from one

-ABILITY anyone else tax payer to another
06. COVERAGE Confined to an entity or Wide coverage because all
individual tax payer members of society are taxed
07. ADMINISTR Higher administrative costs Lesser administrative cost and
-ATIVE COSTS and many exemptions because of stable
08. Tax Evasion Possible Not possible

09. Made of Progressive, Regressive,Enhance,Inequalities

progress Reduce,Inequalities