Difference between direct tax and indirect tax

Law
2023-05-22T08:34:45+00:00

Difference between direct tax and indirect tax

Introduction

Worldwide presence Regarding taxes, it is common to hear the terms “direct tax” and “indirect tax”. However, not everyone knows the difference between them. In this article we will explain to you in a simple and clear way what the difference is between direct tax and indirect tax.

What is a direct tax?

A direct tax is one that is collected directly from the taxpayer. That is, the person in charge of paying the tax is the same individual who receives the income. Examples of direct taxes are the Income Tax (ISR) and the Wealth Tax.

Characteristics of direct taxes:

  • They are paid directly by the taxpayer.
  • Its amount is related to the economic capacity of the taxpayer.
  • They are progressive, that is, the higher the income, the higher the percentage of tax to pay.

What is an indirect tax?

An indirect tax is one that is charged to the final consumer of a good or service. In this case, the taxpayer is not directly the individual who receives the income, but the consumer who purchases the product. Examples of indirect taxes are Value Added Tax (VAT) and Sales Tax.

Characteristics of indirect taxes:

  • They are paid by the final consumer.
  • Its amount is related to the price of the good or service.
  • They are not progressive, that is, the tax percentage is the same for all consumers.

Conclusions

In summary, the difference between direct tax and indirect tax lies in who the tax is directed to. In the case of direct taxes, the taxpayer is the same individual who receives the income, while in indirect taxes, the person responsible for paying the tax is the final consumer of the good or service.

It is important to note this difference as it directly affects the way the tax is calculated and paid.

Remember: Knowing the basic terms related to taxes is essential to make informed decisions when making our personal finances. Do not entertain doubts!

You may also be interested in this related content: