I.1.3 Classification
Taxes are classified on the basis of their form as either
Direct or Indirect.
1. A direct tax is a tax whose incidence of the tax burden
rests upon the person paying the tax. Direct taxes affect the individuals or
firms directly through a deduction from their earnings. An example of a direct
tax is PAYE and tax on income.
2. An indirect tax is said to be a tax whose incidence of tax
burden can be shifted. They are paid to the government by an intermediary and
can be passed on the consumer by including the tax in the final price. An
example of an indirect tax is VAT and Consumption Tax.
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