There are two types of taxation one is direct tax the other one is indirect tax .Direct tax is the tax on income of people or firms and it cannot be avoided .Indirect tax is the tax levied on goods and services .For example VAT is a kind of indirect tax.
The benefits of indirect tax are : To levied tax on goods and services is a good way to control the demand and supply.For example tax on cigarette or on alcohol such as these de-merit goods the consumption of them will certainly fall but because the price of demand elasticity of them is inelastic so the demand won't fall much. people will still but it.But can reduce a Small amount and also the tax revenue will be more for government . And also except the tax on de-merit goods also will have tax on merit good so if it is a merit good the most tax will pay by consumers but if it is a de-merit goods the most cost will pay by suppliers. (the tax diagram)
The costs of indirect tax Will be : If the government charge a highly indirect tax people do not want to pay high price for the goods which is them want to buy ,so they will go the black market
into the informal economy to purchase so that will make a market failure.We will turn to a even worse situation.
Diseconomies of scale
7 years ago
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Clear！Commodity sales tax based on tax rates under tax rules to calculate the amount of VAT should be borne by goods, and then deducting for the production of consumption goods purchased by the production and circulation of goods in the previous part of the VAT has been paid, after deducting the balance for the enterprise tax liability.
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