Types of Taxes
(1) Direct and Indirect Taxes:
(i) Direct Tax : Direct Taxes are those taxes which are paid by the same person whom they are levied. The person on whom direct tax is levied cannot shift its burden to others. It has to be borne by the tax-payer himself. In other words, when impact and incidence of tax fall on the same person, it is called direct tax,
For Example, income tax, property tax, profession tax, wealth tax, etc,are regarded as direct taxes.
(ii) Indirect Tax: Indirect taxes are those taxes whose burden can be shifted i.e. , indirect tax is one which is imposed on one person but it is paid partly or wholly by another person.
For example , union excise duties, sales tax, custom duties, etc. When we buy goods from a shopkeeper, we have to pay trade tax with the price of the goods. Shopkeeper pays tax on his sale to the government and diverts it on his consumer. Due to this shifting of the tax, trade tax is called indirect tax.
(2) Proportional, Progressive and Regressive Taxes.
(i) Proportional Tax – Taxes in which the rate of tax remains constant whatever the size of the tax base may be.
For example, if the rate of income tax remains 20 percent whatever the size of income is, it will be a proportional tax.
(ii) Progressive Tax- Taxes in which the rate of tax increases with the increases in the size of tax base, are called progressive taxes. In India, income tax is a progressive tax.
(iii) Regressive Tax- When the rate of tax decreases as the tax base increases the taxes are called regressive taxes. The burden of such taxes falls, more heavily on the poor than on the rich.
(3) Specific and Ad- valorem Tax
According to method of assessment, taxes on commodities may be classified into two groups – specific and ad-valorem.
(i) Specific tax – Specific taxes are those taxes which are based on specific qualities or attributes of goods such as weight, number or volume of the commodity taxed.
For example, tax on the sugar on the basis of units of weight and on the cloth on the basis of length units are specific taxes.
(ii) Ad-valorem tax – Whereas taxes are levied entirely on the basis of moneyvalue of the goods they are called ad-valorem taxes.
For example, import or export duties are lived in terms of value. Imported or exported goods have nothing to do with their size, length and weight.
