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Indirect Tax Meaning Merits and Demerits of Indirect Taxes Post: Gaurav Akrani. Date: 12/30/2010. No Comments. Label: Economics.
What are the Indirect Taxes ? Meaning ↓
An indirect tax is one in which the burden can be shifted to others. The tax payer is not the tax bearer. The impact and incidence of indirect taxes are on different persons. An indirect tax is levied on and collected from a person who manages to it on to some other person or persons on whom the real burden of tax falls. For e.g. commodity taxes or sales tax, excise duty, custom duties, etc. are indirect taxes.
ARTICLES
COMMENTS
Merits and Demerits of Indirect Taxes
Standard Audit File Monthly subscription from 125 EUR ing and bookkeeping services krgroup.pl
Image Credits © Scott Snider. Hicks classifies direct & indirect taxes on the basis of istrative arrangements. In case of direct taxthere is a direct relationship between the taxpayer and the revenue authorities. A tax collecting agency directly collects the tax from the taxpayers, whereas in case of indirect taxes there is no direct relationship between the taxpayers and the revenue authorities. They are collected through traders and manufacturers. Over the years the share of indirect tax has declined in India due to reduction in the rates of indirect taxes.
Advantages / Merits of Indirect Taxes ↓
The merits of indirect taxes are briefly explained as follows :
1. Convenient
Indirect taxes are imposed on production, sale and movements of goods and
Ads by Google
services. These are imposed on manufacturers, sellers and traders, but their
FEATURED
Indirect Tax
burden may be shifted to consumers of goods and services who are the final taxpayers. Such taxes, in the form of higher prices, are paid only on purchase
Bank Levy
of a commodity or the enjoyment of a service. So taxpayers do not feel the burden of these taxes. Besides, money burden of indirect taxes is not completely felt since the tax amount is actually hidden in the price of the commodity bought. They are also convenient because generally they are paid in small amounts and at intervals and are not in one lump sum. They are convenient from the point of view of the government also, since the tax amount is collected generally as a lump sum from manufacturers or traders.
2. Difficult to evade Indirect taxes have in built safeguards against tax evasion. The indirect taxes are paid by customers, and the sellers have to collect it and remit it to the Government. In the case of many products, the selling price is inclusive of indirect taxes. Therefore, the customer has no option to evade the indirect taxes.
3. Wide Coverage Unlike direct taxes, the indirect taxes have a wide coverage. Majority of the products or services are subject to indirect taxes. The consumers or s of such products and services have to pay them.
Worlds Top 10 Most Poisonous Venomous Deadliest Snakes Balayam Nail Rubbing Exercise Cures Alopecia, Hair Loss, Bald What is Credit Card? Meaning Definition Size Anatomy Glossary Difference Between Primary and Secondary Data Top Inventions and Discoveries by Scientists A to Z List Science How to Improve Human Relations? How To Prepare For Successful Job Interviews ? Best Interview Tips How To Summarize age ? Summarization Skills Techniques Basic Principles of Insurance Examples of Insurance Principles Indian Money Market Features, Drawbacks and Recent Reforms Concept of Marketing Research (MR) Marketing Research Process
4. Elastic Some of the indirect taxes are elastic in nature. When government feels it necessary to increase its revenues, it increases these taxes. In times of
MANAGEMENT
prosperity indirect taxes produce huge revenues to the government.
5. Universality Indirect taxes are paid by all classes of people and so they are broad based. Poor people may be out of the net of the income tax, but they pay indirect
Management Functions And Process, Management Thought Planning First Primary Important Function Of Management Management By Objectives (MBO) Peter Drucker MBO
taxes while buying goods.
Decision Making Process In Management Problem Solving
6. Influence on Pattern of Production
Authority, Responsibility and ability In Management
By imposing taxes on certain commodities or sectors, the government can
Principle of Delegation of Authority Importance of Delegation
achieve better allocation of resources. For e.g. By Imposing taxes on luxury goods and making them more expensive, government can divert resources
Organisation Organizational Structure Organisational Chart
from these sectors to sector producing necessary goods.
Decentralisation Advantages and Limitations of Decentralization
7. May not affect motivation to work and save The indirect taxes may not affect the motivation to work and to save. Since,
Managerial Leadership Leader Qualities Leadership Theories
most of the indirect taxes are not progressive in nature, individuals may not
Human Resource Management Human Resource Development
mind to pay them. In other words, indirect taxes are generally regressive in nature. Therefore, individuals would not be demotivated to work and to save,
Motivation Motivational Factors Incentives Theories of Motivation
which may increase investment.
Maslow's Hierarchy of Needs The Theory of Human Motivation
8. Social Welfare The indirect taxes promote social welfare. The amount collected by way of
Frederick Herzberg's Two Factor Theory Motivation Hygiene Factors
taxes is utilized by the government for social welfare activities, including education, health and family welfare. Secondly, very high taxes are imposed
Douglas McGregor's Theory X and Theory Y Employee Motivation
on the consumption of harmful products such as alcoholic products, tobacco products, and such other products. So it is not only to check their consumption but also enables the state to collect substantial revenue in this manner.
David McClelland's Achievement Motivation, Manifest Need Theory
9. Flexibility and Buoyancy
Marketing Mix and 4 P's of The Marketing Management Article
The indirect taxes are more flexible and buoyant. Flexibility is the ability of the tax system to generate proportionately higher tax revenue with a change in tax base, and buoyancy is a wider concept, as it involves the ability of the tax system to generate proportionately higher tax revenue with a change in tax
5 m's of advertising and advantages of advertising
base, as well as tax rates.
NEW ARTICLES Disadvantages / Demerits of Indirect Taxes ↓
What is Market Segmentation ? Importance In Modern Marketing
Quality Control Total Quality Management TQM Quality Circles
Although indirect taxes have become quite popular in both developed &
Importance of Marketing Research to Government
Under developed countries alike, they suffer from various demerits, of which the following are important.
Fayol's Principle of Division of Work Meaning, Example, Explanation
Indirect tax fails to satisfy the principle of economy. The government has to set
Principles of Good Layout for an ment Copy
up elaborate machinery to ister indirect taxes. Therefore, cost of tax
Basic Assumptions of Law of Demand
1. High Cost of Collection
collection per unit of revenue raised is generally higher in the case of most of the indirect taxes.
2. Increase income inequalities
FINANCE
Generally, the indirect taxes are regressive in nature. The rich and the poor
What is Finance? Meaning Definition Features of Finance
have to pay the same rate of indirect taxes on certain commodities of mass consumption. This may further increase income disparities among the rich and the poor.
What is Financial Planning? Meaning Types of Financial Plans
What is Financial Management? Meaning Definition Scope Articles
3. Affects Consumption Indirect taxes affects consumption of certain products. For instance, a high rate
What is Corporate Finance? Meaning What it Includes?
of duty on certain products such as consumer durables may restrict the use of such products. Consumers belonging to the middle class group may delay their purchases, or they may not buy at all. The reduction in consumption affects the investment and production activities, which in turn hampers
BANKING
economic growth.
What is a Bank ? Introduction, Definition and Features of Bank
Indirect taxes do not create any social consciousness as the taxpayers do not
Different Types of Banks What are Various Kinds of Banks ?
4. Lack of Social Consciousness feel the burden of the taxes they pay.
5. Uncertainty Indirect taxes are often rather uncertain. Taxes on commodities with elastic demand are particularly uncertain, since quantity demanded will greatly affect
Commercial Banks Definitions, Primary Secondary Functions Balance Sheet of Commercial Bank Liabilities and Assets How to Open Bank ? 7 Steps To Open Bank
as prices go up due to the imposition of tax. In fact a higher rate of tax on a particular commodity may not bring in more revenue.
What are the Advantages of Opening Bank ?
Saving Bank Meaning, Features and Advantages of It
The indirect taxes are inflationary in nature. The tax charged on goods and
Fixed Deposit of Bank Meaning, Features, Advantages
6. Inflationary services increase their prices. Therefore, to reduce inflationary pressure, the government may reduce the tax rates, especially, on essential items.
What is Current Bank ? Its Features and Advantages
7. Possibility of tax evasion
Recurring Deposit In Bank Meaning and Features
There is a possibility of evasion of indirect taxes as some customers may not
What is a Cheque ? Definition Kinds and Types of Cheques
pay indirect taxes with the of sellers. For instance, individuals may purchase items without a bill, and therefore, may not pay Sales tax or VAT (Value Added Tax), or may obtain the services without a bill, and therefore,
What are Features of Cheques ? Main Characteristics of Checks
may evade the service tax.
What is Crossing of Cheque ? Different Types of Check Crossing
Automated Teller Machine (ATM) The Advantages of ATM Machine
Conclusion ↓
Elaborate analysis of merits and demerits of direct and indirect taxes makes it clear that whereas the direct taxes are generally progressive, and the nature of most indirect taxes is regressive. The scope of raising revenue through direct taxation is however limited and there is no escape from indirect taxation in spite of attendant problems. There is common agreement amongst economists that direct & indirect taxes are complementary and therefore in any rational tax structure both types of taxes must find a place.
EBanking Online Banking Main Advantages of EBanking Principles of Good Lending Every Banker Follows Loans Different Forms of Advances by Commercial Banks Loan Types Duties and Responsibilities of Computer Operator in Bank Nationalisation of Banks in India Introduction Objectives Demerits Narasimham Committee Report I 1991 II 1998 Recommendations New Economic Reforms of the Banking Sector In India Brief Functions of Reserve Bank of India (RBI) Credit Policy of RBI
CATEGORY istrative Law Advertising Banking Business Development Communication Skills Distinguish Between Economics Education Finance
Industrial Psychology Kalyan City
Management
Related
Marketing Research
Photos
Production Planning
Direct Taxes Meaning Merits and Demerits of Direct Taxes
Difference Between Direct and Indirect Taxes Comparison
What is a Budget ? Components of Government Budget Linkwithin
Indirect Tax Meaning Merits and Demerits of Indirect Taxes
Sitemap of Kalyan City Life Blog
No Comment Yet Please Comment Enter your comment...
Comment as:
Publish
Select profile...
Preview
Newer Posts
© 2016 Kalyan City Life Blog.
Home
Older Posts
KALYAN CITY LIFE
Sharing Wisdom and Vivid Memories of Life
HOME
DISCLAIMER
PRIVACY
Indirect Tax Meaning Merits and Demerits of Indirect Taxes Post: Gaurav Akrani. Date: 12/30/2010. No Comments. Label: Economics.
What are the Indirect Taxes ? Meaning ↓
An indirect tax is one in which the burden can be shifted to others. The tax payer is not the tax bearer. The impact and incidence of indirect taxes are on different persons. An indirect tax is levied on and collected from a person who manages to it on to some other person or persons on whom the real burden of tax falls. For e.g. commodity taxes or sales tax, excise duty, custom duties, etc. are indirect taxes.
ARTICLES
COMMENTS
Merits and Demerits of Indirect Taxes
Standard Audit File Monthly subscription from 125 EUR ing and bookkeeping services krgroup.pl
Image Credits © Scott Snider. Hicks classifies direct & indirect taxes on the basis of istrative arrangements. In case of direct taxthere is a direct relationship between the taxpayer and the revenue authorities. A tax collecting agency directly collects the tax from the taxpayers, whereas in case of indirect taxes there is no direct relationship between the taxpayers and the revenue authorities. They are collected through traders and manufacturers. Over the years the share of indirect tax has declined in India due to reduction in the rates of indirect taxes.
Advantages / Merits of Indirect Taxes ↓
The merits of indirect taxes are briefly explained as follows :
1. Convenient
Indirect taxes are imposed on production, sale and movements of goods and
Ads by Google
services. These are imposed on manufacturers, sellers and traders, but their
FEATURED
Indirect Tax
burden may be shifted to consumers of goods and services who are the final taxpayers. Such taxes, in the form of higher prices, are paid only on purchase
Bank Levy
of a commodity or the enjoyment of a service. So taxpayers do not feel the burden of these taxes. Besides, money burden of indirect taxes is not completely felt since the tax amount is actually hidden in the price of the commodity bought. They are also convenient because generally they are paid in small amounts and at intervals and are not in one lump sum. They are convenient from the point of view of the government also, since the tax amount is collected generally as a lump sum from manufacturers or traders.
2. Difficult to evade Indirect taxes have in built safeguards against tax evasion. The indirect taxes are paid by customers, and the sellers have to collect it and remit it to the Government. In the case of many products, the selling price is inclusive of indirect taxes. Therefore, the customer has no option to evade the indirect taxes.
3. Wide Coverage Unlike direct taxes, the indirect taxes have a wide coverage. Majority of the products or services are subject to indirect taxes. The consumers or s of such products and services have to pay them.
Worlds Top 10 Most Poisonous Venomous Deadliest Snakes Balayam Nail Rubbing Exercise Cures Alopecia, Hair Loss, Bald What is Credit Card? Meaning Definition Size Anatomy Glossary Difference Between Primary and Secondary Data Top Inventions and Discoveries by Scientists A to Z List Science How to Improve Human Relations? How To Prepare For Successful Job Interviews ? Best Interview Tips How To Summarize age ? Summarization Skills Techniques Basic Principles of Insurance Examples of Insurance Principles Indian Money Market Features, Drawbacks and Recent Reforms Concept of Marketing Research (MR) Marketing Research Process
4. Elastic Some of the indirect taxes are elastic in nature. When government feels it necessary to increase its revenues, it increases these taxes. In times of
MANAGEMENT
prosperity indirect taxes produce huge revenues to the government.
5. Universality Indirect taxes are paid by all classes of people and so they are broad based. Poor people may be out of the net of the income tax, but they pay indirect
Management Functions And Process, Management Thought Planning First Primary Important Function Of Management Management By Objectives (MBO) Peter Drucker MBO
taxes while buying goods.
Decision Making Process In Management Problem Solving
6. Influence on Pattern of Production
Authority, Responsibility and ability In Management
By imposing taxes on certain commodities or sectors, the government can
Principle of Delegation of Authority Importance of Delegation
achieve better allocation of resources. For e.g. By Imposing taxes on luxury goods and making them more expensive, government can divert resources
Organisation Organizational Structure Organisational Chart
from these sectors to sector producing necessary goods.
Decentralisation Advantages and Limitations of Decentralization
7. May not affect motivation to work and save The indirect taxes may not affect the motivation to work and to save. Since,
Managerial Leadership Leader Qualities Leadership Theories
most of the indirect taxes are not progressive in nature, individuals may not
Human Resource Management Human Resource Development
mind to pay them. In other words, indirect taxes are generally regressive in nature. Therefore, individuals would not be demotivated to work and to save,
Motivation Motivational Factors Incentives Theories of Motivation
which may increase investment.
Maslow's Hierarchy of Needs The Theory of Human Motivation
8. Social Welfare The indirect taxes promote social welfare. The amount collected by way of
Frederick Herzberg's Two Factor Theory Motivation Hygiene Factors
taxes is utilized by the government for social welfare activities, including education, health and family welfare. Secondly, very high taxes are imposed
Douglas McGregor's Theory X and Theory Y Employee Motivation
on the consumption of harmful products such as alcoholic products, tobacco products, and such other products. So it is not only to check their consumption but also enables the state to collect substantial revenue in this manner.
David McClelland's Achievement Motivation, Manifest Need Theory
9. Flexibility and Buoyancy
Marketing Mix and 4 P's of The Marketing Management Article
The indirect taxes are more flexible and buoyant. Flexibility is the ability of the tax system to generate proportionately higher tax revenue with a change in tax base, and buoyancy is a wider concept, as it involves the ability of the tax system to generate proportionately higher tax revenue with a change in tax
5 m's of advertising and advantages of advertising
base, as well as tax rates.
NEW ARTICLES Disadvantages / Demerits of Indirect Taxes ↓
What is Market Segmentation ? Importance In Modern Marketing
Quality Control Total Quality Management TQM Quality Circles
Although indirect taxes have become quite popular in both developed &
Importance of Marketing Research to Government
Under developed countries alike, they suffer from various demerits, of which the following are important.
Fayol's Principle of Division of Work Meaning, Example, Explanation
Indirect tax fails to satisfy the principle of economy. The government has to set
Principles of Good Layout for an ment Copy
up elaborate machinery to ister indirect taxes. Therefore, cost of tax
Basic Assumptions of Law of Demand
1. High Cost of Collection
collection per unit of revenue raised is generally higher in the case of most of the indirect taxes.
2. Increase income inequalities
FINANCE
Generally, the indirect taxes are regressive in nature. The rich and the poor
What is Finance? Meaning Definition Features of Finance
have to pay the same rate of indirect taxes on certain commodities of mass consumption. This may further increase income disparities among the rich and the poor.
What is Financial Planning? Meaning Types of Financial Plans
What is Financial Management? Meaning Definition Scope Articles
3. Affects Consumption Indirect taxes affects consumption of certain products. For instance, a high rate
What is Corporate Finance? Meaning What it Includes?
of duty on certain products such as consumer durables may restrict the use of such products. Consumers belonging to the middle class group may delay their purchases, or they may not buy at all. The reduction in consumption affects the investment and production activities, which in turn hampers
BANKING
economic growth.
What is a Bank ? Introduction, Definition and Features of Bank
Indirect taxes do not create any social consciousness as the taxpayers do not
Different Types of Banks What are Various Kinds of Banks ?
4. Lack of Social Consciousness feel the burden of the taxes they pay.
5. Uncertainty Indirect taxes are often rather uncertain. Taxes on commodities with elastic demand are particularly uncertain, since quantity demanded will greatly affect
Commercial Banks Definitions, Primary Secondary Functions Balance Sheet of Commercial Bank Liabilities and Assets How to Open Bank ? 7 Steps To Open Bank
as prices go up due to the imposition of tax. In fact a higher rate of tax on a particular commodity may not bring in more revenue.
What are the Advantages of Opening Bank ?
Saving Bank Meaning, Features and Advantages of It
The indirect taxes are inflationary in nature. The tax charged on goods and
Fixed Deposit of Bank Meaning, Features, Advantages
6. Inflationary services increase their prices. Therefore, to reduce inflationary pressure, the government may reduce the tax rates, especially, on essential items.
What is Current Bank ? Its Features and Advantages
7. Possibility of tax evasion
Recurring Deposit In Bank Meaning and Features
There is a possibility of evasion of indirect taxes as some customers may not
What is a Cheque ? Definition Kinds and Types of Cheques
pay indirect taxes with the of sellers. For instance, individuals may purchase items without a bill, and therefore, may not pay Sales tax or VAT (Value Added Tax), or may obtain the services without a bill, and therefore,
What are Features of Cheques ? Main Characteristics of Checks
may evade the service tax.
What is Crossing of Cheque ? Different Types of Check Crossing
Automated Teller Machine (ATM) The Advantages of ATM Machine
Conclusion ↓
Elaborate analysis of merits and demerits of direct and indirect taxes makes it clear that whereas the direct taxes are generally progressive, and the nature of most indirect taxes is regressive. The scope of raising revenue through direct taxation is however limited and there is no escape from indirect taxation in spite of attendant problems. There is common agreement amongst economists that direct & indirect taxes are complementary and therefore in any rational tax structure both types of taxes must find a place.
EBanking Online Banking Main Advantages of EBanking Principles of Good Lending Every Banker Follows Loans Different Forms of Advances by Commercial Banks Loan Types Duties and Responsibilities of Computer Operator in Bank Nationalisation of Banks in India Introduction Objectives Demerits Narasimham Committee Report I 1991 II 1998 Recommendations New Economic Reforms of the Banking Sector In India Brief Functions of Reserve Bank of India (RBI) Credit Policy of RBI
CATEGORY istrative Law Advertising Banking Business Development Communication Skills Distinguish Between Economics Education Finance
Industrial Psychology Kalyan City
Management
Related
Marketing Research
Photos
Production Planning
Direct Taxes Meaning Merits and Demerits of Direct Taxes
Difference Between Direct and Indirect Taxes Comparison
What is a Budget ? Components of Government Budget Linkwithin
Indirect Tax Meaning Merits and Demerits of Indirect Taxes
Sitemap of Kalyan City Life Blog
No Comment Yet Please Comment Enter your comment...
Comment as:
Publish
Select profile...
Preview
Newer Posts
© 2016 Kalyan City Life Blog.
Home
Older Posts
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