Understanding Indirect Taxes: How They Work and Their Impact

Indirects are a type of tax that is not directly collected from individuals or businesses, but rather through other means. For example, an indirect tax may be levied on goods and services, and then passed on to consumers in the form of higher prices. The government does not receive the tax revenue directly, but rather through the sales tax or value-added tax (VAT) collected by retailers.

Indirect taxes can also be imposed on businesses, such as a tax on their gross receipts or profits. In this case, the business pays the tax and then passes on the cost to its customers in the form of higher prices.

Examples of indirect taxes include:

1. Sales taxes: These are levied on goods and services at the point of sale, and are typically passed on to consumers in the form of higher prices.
2. Value-added tax (VAT): This is a type of sales tax that is levied on the value added to goods and services at each stage of production and distribution.
3. Excise taxes: These are levied on specific goods and services, such as gasoline, alcohol, and tobacco products.
4. Property taxes: These are levied on real estate and other forms of property ownership.
5. Business taxes: These can include taxes on gross receipts, profits, or other business activities.

Indirect taxes are often used by governments as a way to raise revenue without directly taxing individuals or businesses. They can be less visible than direct taxes, but they can still have a significant impact on the economy and consumers.