An indirect taxes such as sales tax, per unit tax, value added tax (VAT), or goods and services tax (GST) is a tax collected by an intermediary such as a retail store from the person who bears the ultimate economic burden of the tax such as the consumer. The intermediary later files a tax return and forwards the tax proceeds to government with the return. In this sense, the term indirect tax is contrasted with a direct tax, which is collected directly by government from the persons legal or natural on whom it is imposed. An indirect tax may increase the price of a good to raise the price of the products for the consumers.Examples would be fuel, liquor, and cigarette taxes.
Import duties, fuel, liquor and cigarette taxes are all considered examples of indirect taxes. Indirect taxes are defined by contrasting them with direct taxes. In the case of direct taxes, the person immediately paying the tax is the person that the government is seeking to tax. Income tax is the clearest example of a direct tax, since the person earning the income is the one immediately paying the tax. Admission fees to a national park is another clear example of direct taxation. The most common example if an indirect tax is import duties. The duty is paid by the importer of a good at the time it enters the country.
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