Question

In Insurance Accounting Course

What do you mean by tax?

How do you classify the tax into direct and indirect?

Give 3 examples of each types.

Answer 1

A tax is a charge levied by the government on earnings of persons and thing or taxpayer (defined in tax laws) to meet public expenditure(like road, defense, various schemes).

Tax is an income of government which it collects to meet certain obligation and welfare for the public.

Direct taxes - Direct taxes are collected directly from persons by the government like ( income tax on your earnings, wealth tax, social security tax)

Indirect tax - It does not collect directly from a person. It is based on consumption of material(goods or services).(Excise duty, Sales tax, customs duty).

Excise duty levies on the production of goods.

custom duty levies on the import of goods.

sales tax - levies on sales of goods based on value added.

Please comment in case of further clarification required.