Indirect Tax: Merits and Demerits

For introduction to indirect taxes, see this page. However one can define indirect taxes as

Tax imposed on one person but partly or wholly paid by another. Thus the person bearing and paying the tax are different.Examples: VAT, entertainment tax, excise duty, Sles and hotel tax, import duty, export duty

Merits of Indirect Tax

• convenient coz the taxpayer needn't pay lump sum for the amount of tax
• mass participation is there as each and every person purchasing a good is levied upon the tax
• less chances of tax evasion as taxpayers pay the tax collected from consumers
• government can impose tax rates seeeing the quality of goods

Demerits of Indirect Tax

• uncertain because as demand fluctuates the tax rates wll also fluctuate
• regretful coz tax burden to the rich and poor are the same
• bad effect on consumption, production and employment. Higher rates will reduce all of them
• taxpayers wont know how much tax they are paying to the government
  
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