Types of Taxation

There are different types of taxtion. Taxes are usually classified into two different types:

Direct Taxation.
Indirect Taxation.

Direct Taxation:

In terms of economics, direct taxes refer to that form of taxes collected from the individual or organization on which they are apparently imposed. For instance, income taxes are collected from the person who earns the income or the case of paying gift tax. In U.S Constitutional provision, however, the direct taxation has a different meaning; it usually refers to the property tax or the poll taxes, which are based on simple logic of ownership or existence.

Indirect Taxation:

By contrast, in terms of economics, indirect taxes are just opposite to that of direct taxation. Indirect taxes are collected from some one other than the person apparently responsible for paying the taxes, and are usually collected by an intermediary body, like for example retail store, which collects the sales taxes from the proceeds during the purchase. The intermediary body later files a tax return and forwards the tax proceeds to government with return. So the contrast from direct taxation is quite evident, while in the first case it was directly collected by government from the individual or the organization on which it is imposed, and in indirect taxation it requires one intermediary body. Again the concept of indirect taxation is a bit different according to the U.S Constitution. Indirect taxes are usually imposed on rights, privileges, and activities of any individual or organization. Thus, if you are an American citizen and you are selling off your property, would invite an indirect taxation on you.

Keywords:

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