Indirect Taxes Provides Both Merits and Demerits

Indirect taxes are one wherein the burden may be transferred to others. In this situation, the taxpayers are not the bearer of the tax. The incidence and impact of these indirect taxes vary from person to person. An indirect tax is usually collected and levied from one person who has the ability to shift it to other people whom the true tax burden falls.

Direct and indirect tax is classified according to the administrative arrangement basis. In terms of direct taxes, there is a present direct relationship in between the revenue authorities and taxpayers. The agency that manages the tax collection collects the taxes directly from the taxpayer. In the case of indirect taxes, there will be no direct relationship in between the revenue authorities and the taxpayers. They are usually collected through manufacturers and traders.

The main benefits provided by indirect taxes include convenience, difficulty to evade, elasticity, universality, wide coverage, and social welfare, buoyancy and flexibility, and production pattern influence. They do not affect motivation to save and work. Many people acknowledge and appreciate the merits that they received from indirect taxes.

On the other, this kind of tax has also demerits for some developed and even underdeveloped countries. Some of them include the higher cost of collection, affects consumpti8on, increase in income inequalities, inflationary, uncertainty, lack of social consciousness, and tax evasion possibility.

Elaborating the advantages and disadvantages of indirect and direct taxes clarifies the fact that direct taxes have been generally progressive while the indirect tax nature is regressive. The raising revenue scope with the aid of direct taxation is bounded and there is no actually escape from the indirect taxation despite the attendant problems.