Direct and Indirect Taxes

1. Taxes are most commonly classified as either direct or indirect. A direct tax is one that cannot be shifted by the taxpayer to someone else while an indirect tax can be shifted to someone else.

2. Direct taxes are primarily taxes on persons. They are aimed at the individual's ability to pay as measured by his income or his net wealth. The main type of a direct tax is an income tax. Individual income taxes are commonly levied on total personal net income in excess of some stipulated minimum. They are also commonly adjusted to take into account the circumstances influencing the ability to pay of the individual, such as family status, number and age of children, and financial burdens resulting from illness. They are often levied at graduated rates, that is, at rates that rise as income rises.

3. Another example of a direct tax is a real estate or property tax. It represents the most important source of income to most governments. This tax is usually based upon the value of taxpayer’s possessions – usually his home and land. The more expensive the property is, the higher the real estate tax will be.

4. Indirect taxes are levied on objects and services or transactions. They include taxes on sales of consumer goods, value-added taxes, taxes on goods in the process of production, taxes on legal transactions, and import or customs duties.

5. Sales taxes are taxes imposed on the sale of goods or services. The same tax rate can be applied to all taxed items. In New York City, for example, everything sold (except food and drugs) is subject to a sales tax – 8% will be added to the price of whatever you buy as a sales tax. Value-added taxes (VAT), one of the most important fiscal innovations of the second half of the 20th century, are commonly collected by allowing the taxpayer to deduct a credit for tax paid on purchases from liability on sales.

6. Taxes on specific commodities are called excises and are distinguished from sales taxes. Excises and customs duties are levied on almost everything, from necessities such as bread, meat, and salt, to nonessentials such as cigarettes, wine, liquor, coffee, and tea, to luxuries such as jewels and furs. Some excises and customs duties are specific – i.e., they are levied on the basis of weight, length, volume, and other specific characteristics of the tax object. Other taxes are ad valorem – levied on the value of the goods as measured by the price.

7. Taxes on legal transactions are levied on the issue of shares, on the sale of houses and land, and on stock exchange transactions. For administrative reasons, they are frequently levied in the form of stamp duties – that is, the legal or commercial document is stamped to denote payment of the tax.

Notes:

income tax - подоходный налог

graduated rate – прогрессивная ставка

real estate or property tax – налог на недвижимость

value-added tax (VAT) – налог на добавленную стоимость (НДС)

import or customs duties – импортные или таможенные пошлины

excise – акциз

ad valorem – соответствующий стоимости

stock exchange – фондовая биржа

stamp duty – гербовый сбор

2. Выберите правильный вариант окончания предложения, используя информацию текста.

1. __________ is a direct tax.