Distinguish between direct taxes and indirect taxes' Give an example of each.

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answered Jun 14, 2018 by ujjawal (30.2k points)
selected Jun 14, 2018 by rubby

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Direct Tax	Indirect Tax
Direct tax is imposed directly on the taxpayer and is paid by the taxpayer directly to the government. The incidence and impact of the tax is on the same person.	Indirect tax is tax collected by intermediaries (e.g. retailers) from the ultimate taxpayer i.e. consumers. The incidence and impact of the tax is on different persons.
Its burden cannot be transferred to other person.	Its burden can be shifted from one person to other. e.g. manufacture shifts the burden of tax to retailers who in turn shift it to consumers.
It doesn't affect the prices.	Indirect tax may affect prices, as generally, consumers pay high prices which are inclusive of taxes.
For example, Income tax, property tax etc.	For example, VAT, customs duty etc.