Principles of Taxation

Chapter 5

Classification of Taxes

The most common and traditional classification of taxes is as follows:

Direct Tax

  • This is a tax whose burden is borne by the person on whom it is levied.

  • Examples include PAYE, corporation tax, capital gains tax, wealth tax etc.

  • Considered to be progressive

Indirect tax

Indirect taxes are those paid by consumers when they buy goods and services.

  • May result with higher retail price.

  • Levied equally irrespective of income.

  • Examples include VAT, excise tax, customs duty.

  • Considered to be regressive.

However, its good to note that some taxes exhibit both progressive and regressive characteristics. @2014-2020 All rights reserved
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