Indirect Tax

Value Added Tax (Defnition)

This tax is levied on goods and services as a percentage of selling price.
Also known as an _____ ______________ tax. Normally a fxed rate but some
goods and services may be exempt or at a lower rate to encourage their
consumption. E.g. _______________________
___________________________________________________________________________
hat is the name of New !ealand"s value added tax#
______________________________________
hy are $alue Added Taxes known as regressive taxes#
$alue Added Taxes are also levied on _________ ____________ components and
materials bought by ________________% not &ust fnished goods and services bought
by consumers.
Tarifs (Defnition)
Also called a customs ____________ or an impost.
This tax is levied on the price of goods imported
from overseas% as they enter a country.
These taxes are to discourage people from buying
imported goods and buy goods of domestic producers
instead.
'igh tari(s can encourage illegal _____________________
which may mean borders have to be patrolled. This cost
can be covered from revenue the government gains from
____________________________.
Excise Duties (Defnition)
These taxes are placed on certain goods based on )uantity *not value+
purchased.
E.g. duties
on___________________________________
Not only do these duties raise ____________ for
the government% but most importantly they
discourage consumption because they are
damaging to health or to the environment.
Excise duties that discourage harmful
environmental actions are also called
____________ _______.
User Taxes/Charges (Defnition)
This type of excise duty is linked to specifc goods or activities. E.g. road ,
bridge , tunnel tolls% or congestion charges.
Hypothecated Tax (Defnition)
This -ser tax is levied to raise revenue for a specifc purpose such as
paying for the cost of a road or public transport improvements. E.g.
_____________________ bridge.
ADVANTAGE !" INDI#ECT TA$E%
&' Cost o( Collection
.ndirect taxes are ___________ to collect.
/ost of collection lies mainly with
_________________________________________
)' *ider Tax +ase
0aid by young% old% employed% unemployed alike% not &ust by income
earners.
This spreads the e(ect of tax more evenly throughout the
___________________.
,' electi-e Ai.s
/an be used to achieve
specifc aims. E.g.
discouraging consumption%
improving the environment
etc.
/' Tax Alterations
1uicker and easier for
government to impact on
the marcoeconomy by
changing indirect taxes
rather than direct taxes.
DIADVANTAGE !" INDI#ECT TA$E%
&' Uncertainty
A government can only guess how much people will spend on goods
and services so will be uncertain as to how much ________________
indirect taxes will raise.
This makes planning future public expenditure di2cult.
.f actual revenues are less than forecasted% then the government
will have a _________________ _______________ which will lead to
unforeseen borrowing re)uirements.
)' #egressi-e
The burden in these taxes tends to be greater on _____________
people as they spend a greater proportion of their incomes than
wealthier people.
,' In0ation
These taxes add to the _____________ of goods and services and can
therefore increase price in3ation.
.f demand is very price _______________% a frm may not be able to
pass the extra tax on to consumers.
0roducers argue that direct taxes increases _______________ and
lowers __________________.