Difference Between Direct And Indirect Tax With an Example of Each. Direct tax is paid directly by the taxpayer to the government and cannot be shifted, like federal income tax. In contrast, indirect tax, such as business property taxes, can be passed on or shifted to others
Taxes can be either direct or indirect. A direct tax is one that the taxpayer pays directly to the government. These taxes cannot be shifted to any other person or group. Indirect taxes are basically taxes that can be passed on to another entity or individual. They are usually imposed on a manufacturer or supplier who then passes on the tax to the consumer.
Watch a quick explanation on direct vs indirect taxes
Distinguishing between Direct and Indirect Taxes With an Example of Each
Did you know: The most common example of an indirect tax is the excise tax on cigarettes and alcohol. Value-Added Taxes (VAT) are also an example of an indirect tax.
Examples of Direct Tax
- Income Tax
- Corporation Tax,
- Property Tax, Inheritance Tax, and
- Gift Tax
Examples of Indirect Taxes
- Sales tax
- Excise tax
- Customs tax
- Gas tax