Indirect taxes - advantages and disadvantages
The benefits of indirect taxes
For a state with a developed economic structure, indirect taxes in comparison with direct taxes have their own advantages due to an increase in the well-being of the population and an increase in its purchasing power.
The regularity and speed of indirect tax revenues are directly dependent on purchasing power. These taxes are convenient for the consumer, because they do not require certain savings, they are determined precisely by the amount of consumption of the final product in the absence of a forced collection (if you want to buy a product - pay an indirect tax, if you do not want to pay tax - do not buy the product). In addition, the collection and control of the receipt of this type of tax does not require the expansion of the state tax service.
Disadvantages of indirect taxes
With all the advantages of indirect taxes, there are also disadvantages. The most serious drawback is the implementation of the tax on the principle of self-taxation. The payer independently regulates individual taxability.Indirect tax is divided on each buyer disproportionately to his income, as a result of which the increase in rates for these taxes becomes unaffordable for the socially unprotected low-income population.
Indirect taxes have a fiscal focus. In addition, there is a need to maintain a large number of personnel in order to control the goods that enter the market segment and its correct taxation. Customs duty requires the maintenance of a huge customs service to prevent the importation of smuggled goods into the country, and as a result, underestimate the amount of indirect taxes.
The collection of indirect taxes goes against the interests of entrepreneurs, limits the amount of profit, because it is not always possible to increase the selling price in proportion to the increase in the rate of indirect tax.
In order to successfully collect indirect taxes, the controlling state authorities are constraining manufacturers with mandatory rules for the production and sale of their products.
Considering all the pros and cons of collecting indirect taxes, we can sum up - indirect taxes cannot lead the state’s tax system,because they do not meet the basic optimal tax requirements. Only a rational combination of collection of indirect and direct taxes can create a tax system that will meet the country's fiscal interests and the economic benefits of taxpayers.
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