What is Indirect Tax? Definition of Indirect Tax
What is Indirect Tax
A tax collected by an intermediary (such as a supplier) from the economic agent who bears the formal incidence of the tax (such as the customer). Taxed levied on goods or services for example value-added tax (VAT) or excise duties on alcohol and tobacco, are seen as indirect. These taxes are indirect because the tax payment to the revenue service is made by the firm selling the good but the tax charged to the consumer.
The extent to which the tax burden is shared between the supplier and the customer depends on the elasticities of supply and demand.