What is an Indirect Tax?

• What is an Indirect Tax:

  • Indirect tax is a levy on a good or service
• What is an Indirect Tax?

  Indirect tax is a levy on a good or service
• Specific/Unit Tax – A fixed amount that is charged per unit of a particular good, no matter what the price of that good is.  ​
• Ad valorem – Charged as a proportion of the price of a good.  E.g. VAT.  ​
• A specific unit tax is a fixed amount that is charged
• An Ad valorem tax is charged as a proportion of the price of the good
• Example of an Ad valorem tax?

  VAT
• Indirect taxes tend to be levied on ‘ demerit goods’ with ‘negative externalities’.