LAW OF TAXATION

PRESENTATION TOPIC
Advantages & Disadvantages of Direct
& Indirect Tax

Group Members:
ROOFA NASEER [BL- 1550]
ERUM FATIMA [BL- 1552]
KARAM ZEHRA [BL- 1560]
Content
Introduction.
• Direct Tax.
• Indirect Tax.
• Advantage & Disadvantages [Direct Tax]
• Advantages & Disadvantages [Indirect Tax]
• Conclusion.
What is Tax?
• Tax is a money people & businesses pay to the government
• It’s a way the government Collects funds for public services

What is Direct Tax?

Direct taxation is a type of tax that is levied directly on individuals or
organizations. Examples include income tax, property tax, and corporate
tax. Direct taxation is considered progressive, as those who earn more pay
a higher percentage of their income in taxes.

What is Indirect Tax?

Indirect taxation is a type of tax that is levied on goods and services.
Examples include sales tax, value-added tax (VAT), and excise tax.
Indirect taxation is considered regressive, as those with lower incomes
pay a higher percentage of their income in taxes.
ILLUSTRATIONS [Direct & Indirect Tax]
Direct Taxation

Scenario: Income Tax

Ahmed earns $50,000 per year. He is required to pay a
portion of his income as income tax to the government.
Let’s say the income tax rate is 20%. Ahmed’s direct tax
liability would be $10,000 (20% of $50,000).

Indirect Taxation

Scenario: Sales Tax

Sarah goes to a store to buy a laptop. The laptop costs
$1,000, and there is a 10% sales tax on electronic items.
When she purchases the laptop, she pays an additional
$100 as a sales tax. This $100 is an indirect tax collected
by the government through the seller, and Sarah bears
the burden of this tax as part of the total cost of the
laptop.
 Advantages of Direct Taxation

1. Promotes Equality

2. Curbs Inflation

3. Easy to Collect
4.
4. Promotes Certainty

5. Budgeting for Government

Disadvantages of Direct Taxation

1. Create social conflict

2. Discriminatory

3. Disincentive

4. Discourage Savings

5. Unavoidable
 Advantages of Indirect Taxation

1. Broad Revenue Source Contributes

2. Easy to Collect

3. Avoid discrimination on basis of class

4. Progressive in nature

5. Stable Revenue
 Disadvantages of Indirect Taxation

1. Regressive

2. Encourages Tax Evasion

3. More Burden on Middle/Lower Class

4. Can Hurt Basic Needs

5. Complex and Varying

 Conclusion

In conclusion, both direct and indirect taxation

have their advantages and disadvantages.
Direct taxation is fair and can be used to
discourage certain behaviors, but it can be
complex and difficult to enforce.
Indirect taxation is easy to understand and
implement, but it is regressive and can also
be used to discourage certain behaviors.
Ultimately, the choice between direct and
indirect taxation depends on the goals of the
government and the needs of the economy.
Thankyou!