Impact of Indirect Tax in the Economic Growth of Bangladesh
Shish Haider Chowdhury
Auditing & Taxation
Date of Submission
Institute of Business Administration
An indirect tax (such as sales tax, a specific tax, value added tax (VAT), or goods and services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer). The intermediary later files a tax return and forwards the tax ...view middle of the document...
It is broadly based since it is applied to everyone in the society whether rich or poor. Since the cost of the tax does not vary according to income, indirect taxation is a regressive tax, or in other words it imposes a greater burden (relative to resources) on the poor than on the rich. The taxpayer who pays the tax does not bear the burden of tax; the burden is shifted to the ultimate consumers. In the case of a direct tax, the taxpayer has to bear the burden of tax personally; in case of indirect tax the taxpayer and the taxbearer are not the same person.
Advantages of Indirect Taxes
Indirect taxes have advantages of their own. Briefly speaking they are as under:—
1. They are the only means of reaching the poor. It is a sound principle that every individual should pay something, however little, to the State. The poor are always exempted from paying direct taxes. They can be reached only through indirect taxation.
2. They are convenient to both the tax-payer and the State. The tax-payers do not feel the burden much, partly because an indirect tax is paid in small amounts and partly because it is paid only when making purchases. But the convenience is even greater due to the fact that the tax is "price-coated". It is wrapped in price. It is like a sugar-coated quinine pill. Thus, a tobacco tax is not fell when it is included in the price of every cigarette bought. It is convenient to the State as well which can collect the tax at the ports or at the factory. A dealer collects the tax when he charges a price. He is a honorary tax collector.
3. Indirect taxes can be spread over a wide range. Very heavy direct taxation at just one point may produce harmful effects on social and economic life. As indirect taxes can be spread widely, they are more beneficial and suitable.
4. They are easy to collect. Collection takes place automatically when goods are bought and sold.
5. They are very elastic in yield, if...