Indirect Taxation


Indirect Taxation

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. 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.

What many people are not aware of is that practically everyone pays taxes, especially indirect taxes. This is because taxes are imposed on almost all the products that we consume. Here are some of the types of indirect taxes.

Types of Indirect Taxes

Whenever people go to the malls or department stores to shop, they are already about to pay indirect taxes. Goods such as household items, clothing, and other basic commodities are subject to such types of taxes. Upon payment at the counter, the final sale price is padded with a sales tax that the store collects and pays to the government.

Excise tax is also very common. When a manufacturer buys the raw materials for the company’s products, for example, tobacco for cigarette companies, they already need to pay indirect taxes on the items. Through a part of the normal course of business, the manufacturer can pass on the burden to the consumers by selling the cigarettes at a higher price.

Ever wonder why imported products are expensive? It is because of customs tax. When a container filled with bananas from another country enters the US, the importer pays a tax (customs tax), which is then passed on to consumers.

Yes, buying gasoline for vehicles contains an indirect tax.

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