Page 14 - F1 Integrated Workbook STUDENT 2018
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Chapter 1
Direct and Indirect Taxation
A tax is either a direct or an indirect tax.
2.1 Direct taxes
These are imposed directly on the person or enterprise required to pay the tax, i.e.
tax on personal income such as salaries, tax on business profits or tax on disposals
of chargeable assets. The person or enterprise must pay the tax directly to the tax
authorities on their income. Examples in the UK of direct taxes would be income tax,
capital gains tax or corporation tax.
2.2 Indirect taxes
This tax is imposed on one part of the economy with the intention that the tax burden
is passed on to another. The tax is imposed on the final consumer of the goods or
services. The more the consumer consumes the greater the tax paid. An example
would be sales tax such as VAT in the UK.
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