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LSDefine
Simple English definitions for legal terms
indirect tax
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A quick definition of indirect tax:
An indirect tax is a type of tax that the government charges on goods and services. It is not paid directly to the government, but instead, it is included in the price of the product or service. For example, when you buy a candy bar, the price includes an indirect tax that goes to the government. Indirect taxes can also be charged on things like gasoline, cigarettes, and alcohol. These taxes help the government raise money to pay for things like schools, roads, and hospitals.
A more thorough explanation:
An indirect tax is a type of tax imposed by the government on goods and services. It is not directly paid by the person who consumes the goods or services, but is included in the price of the product. The seller of the product collects the tax from the buyer and pays it to the government.
- Value Added Tax (VAT) - A tax on the value added to a product at each stage of production and distribution.
- Excise Duty - A tax on specific goods such as alcohol, tobacco, and petrol.
- Customs Duty - A tax on goods imported into a country.
These examples illustrate how an indirect tax is added to the price of a product and paid by the buyer. For example, if a bottle of wine costs $10 and the excise duty is $2, the seller will charge the buyer $12 and pay the $2 excise duty to the government.