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Direct taxes, which were expected to be used only in emergencies, did not have the built-in protections characteristic of indirect taxes. Direct taxes were imposed directly on individuals, who, it. Direct taxes are levied on personal income and wealth and corporate profits. And the burden of such taxes, that is, who actually pays the tax, cannot be shifted. Indirect taxes, such as VAT or sales tax, excise duties on commodities like alcohol, tobacco and petrol, can be shifted, in that while the tax is levied on a company such as a retailer. Taxation - Taxation - Principles of taxation: The 18th-century economist and philosopher Adam Smith attempted to systematize the rules that should govern a rational system of taxation. In The Wealth of Nations (Book V, chapter 2) he set down four general canons: Although they need to be reinterpreted from time to time, these principles retain remarkable relevance. Direct Taxes and Indirect Taxes Updates for June Examination 4 DIRECT TAXES (A) INCOME TAX (INCOME TAX ACT, ) (1) Tax Rates: (a) In the case of every individual or Hindu undivided family or association of persons or body of individuals or every artificial juridical person: Upto Rs. 1,80, Rs.1,80, to Rs. 5,00,
Direct Tax Laws (Income Tax and Wealth Tax) and Indirect Tax Laws (Service Tax, Value Added Tax and Central Sales Tax) covered in the Syllabus. The study material contains all relevant amendments made by Finance Act, and is applicable for the Assessment Year relevant for June and December examination. In the case of a direct tax, the taxpayer is the person who bears the burden of it. Conversely, in the case of an indirect tax, the taxpayer, shifts the burden on the consumer of goods and services and that is why the incidence falls on different persons. Direct taxes differ from indirect taxes not only in the manner of collection but also in the more important fact that they cannot be passed on; those who pay them cannot demand reimbursement from others. In the main, the incidence of direct taxation falls on incomes and accumulations rather than on goods in the course of exchange. A critical issue, pointed out by Yitzhaki (), is whether the penalty for discovered evasion depends on the income understatement, as A–S assume, or on the tax understatement, as more accurately reflects practice in many countries. In the latter case, the maximand becomes (1 − p)U(ν + t(y − x)) + pU(ν − θt(y − x)), and the expected payoff per dollar of evaded income becomes (1.
Flat rate and ad valorem taxes; Incidence of indirect taxes and subsidies on the producer and consumer; Implication of elasticity of supply and demand for the incidence (burden) of taxation Theory of the firm (higher level only) Cost theory Types of costs: fixed costs, variable costs (distinction between short-run and long-run). Indirect taxes are defined by contrasting them with direct taxes. Indirect taxes can be defined as taxation on an individual or entity, which is ultimately paid for by another person. Taxation is, by and large, the most important source of government revenue in nearly all countries. According to the most recent estimates from the International Centre for Tax and Development, total tax revenues account for more than 80% of total government revenue in about half of the countries in the world – and more than 50% in almost every country. Pollard-Urquhart was the author of: 1. ‘Agricultural Distress and its Remedies,’ Aberdeen, 2. ‘Essays on Subjects of Political Economy,’ 3. ‘The Substitution of Direct for Indirect Taxation necessary to carry out the Policy of Free Trade,’ 4.