What Is The Difference Between Indirect Taxation And Direct Taxation?

Before trying to establish the difference between direct and indirect taxation, it is perhaps best to define the terms individually. Direct taxes are applied to sources of income, such as wages, property, savings or other taxable assets, of every person residing within any given country. These taxes are calculated according to the total income of each individual and paid regularly (once a month, or once a year, for instance) to the government. In some countries, direct taxation is referred to as legalised extortion by critics. It is, however, important for these taxes to be collected in order to support the infrastructure of each country.
In contrast, indirect taxation is a charge applied to rights, privileges, expenditure or consumption, rather than income or property. Customs and excise duties on imports and production, and sales or value added tax (VAT) applied during the production-to-distribution process are all examples of indirect taxes.

As they are less obvious to consumers than direct income taxes, governments tend to be more tempted to increase them to generate additional state revenue. Otherwise known as consumption taxes, they are termed as regressive measures, because they are not based on a principle of the ability to pay.

Tax laws can stipulate what can be taxed directly or indirectly, but they are not able to determine how the funds to pay them are collected. It is thus possible for a direct tax to become an indirect tax to consumers through retailers passing the cost of a direct tax on to them via increased prices.

The difference of direct and indirect taxation consequently lies in the nature of what they are applied to: Direct taxes are applied to tangible concepts such as income or property, whereas indirect taxes are applied to the use of such property or income.

1. Direct tax imposed obn persons  whereas indirect tax imposed on commodities.
2. In direct tax, tax is directly related to taxable incomes. In indirect tax, tax on services indirectly determined.
3. In direct tax, no shifting of tax burden but in indirect tax shifting of tax burden is possible.
4. Direct tax is not easy to collect but indirect tax easy to collect becauswe of system.
5. Cost of collection is more in direct tax. In indirect tax, cost of collection is less.

A direct tax in to be paid by the person or organization on which the tax is imposed. A direct tax as like an income tax or property tax, levied directly on the taxpayer is to be paid by the person.

An indirect tax is a tax which can be such as a sales tax or value-added tax that is known to be levied on goods or services rather than individuals. The indirect tax is then ultimately paid by a consumer which is mostly in the form of higher prices.

These indirect taxes are imposed on goods and services rather than on individuals, organizations and firms.

Direct taxation is defined as the tax which is directly levied on the citizens of a country. All individuals and business concerns have to pay direct taxes to the government on a regular basis. These direct taxes are calculated on every source of income that accrues to the business of individual.

On the other hand, the citizens of a country are charged certain levies indirectly as well. These indirect levies are known as indirect taxes. These are the taxes payable on an activity or a commodity. Some common examples of indirect taxes are sales tax and excise tax.

Even though direct taxation is a perfectly legal form of taxation, some critics of income tax laws in some countries are of the opinion that governments of those countries are using fair means to extort huge sums of money that has been earned. However, it is important to pay direct taxes in order to be able to avail the infrastructure facilities of the country and is also necessary to avoid the vicious cycles of black money and tax evasion.

Taxes are of two types including direct tax or indirect tax. Direct taxes are those which are directly collected from the parties on which they are applicable for example income taxes, poll taxes and property taxes. On the other hand, indirect taxes are those which are collected from someone than the person responsible for it. Examples of indirect tax include the tax imposed on the sales of tax etc. Direct and indirect taxes have a number of other examples but they do not have fixed types.

Type direct and direct tax

There are two ways whereby the government levied the tax.

Direct tax

Indirect tax

Direct taxes are paid on income and indrect taxes are charged on the expenditure.

Taxes tat are paid directly to the government is known as direct tax. Eg.,income tax. And taxes tat are paid or imposed on commodities and services are known as indirect tax. Eg.,sales tax

In points difference between direct and indirect taxes?