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Tax classification may differ depending on the basis. Most often, taxes are divided into direct and indirect; this differentiation depends on where exactly the source of their payment is formed.

What is their main difference for an entrepreneur, which taxes are direct and which are indirect, and whether these two types can transform into one another, we will try to figure out below.

Direct taxes – historically the first

When the prototype of the tax system appeared in the world, the first taxes that people were levied on were direct taxes. They had to be paid from their property or everything that made a profit for a given period.

In principle, the basic meaning of a direct tax remains the same today.

Direct tax is a payment made by an individual or legal entity to the state from income and/or property received.

The payer of such a tax is a person who has received income or owns property, if this income or property constitutes the tax base.

Tax agent (person who remits tax to state system) and the actual payer in the case of direct tax are completely the same.

Properties of direct taxes

Direct taxes are inherent in:

• obligation– they are collected regardless of the will of the payer;
• immediacy– direct connection between the state and the entrepreneur: the tax burden is felt by the payer constantly and regularly;
• focus– immediately upon transfer of funds from these taxes, the federal, regional or local budget receives;
• calculation– calculated using a special formula: the product of the interest tax rate and the quantitative equivalent of the legally established base;
• differentiation– for certain categories of payers, tax benefits or even the opportunity not to pay a certain tax are possible;
• declaration– government bodies have information in advance about the amount of tax transferred, since the entrepreneur submits the corresponding tax return or other reporting document;
• direct impact on the economy– the management of economic processes largely depends on direct taxation: from supporting priority sectors of business to suppressing less acceptable ones.

Types of direct taxes

1. Based on the receipt of profit, direct taxes can be divided into:
   • taxation of actual income: the payer deducts a percentage of the actual profit received, based on his solvency (for example, profit tax, income tax, etc.);
   • taxation of expected profit: the taxable object potentially represents a source of profit, from which a certain percentage will be withdrawn (property tax, land, transport and other taxes).
2. Having determined whether the payer is subject to a special tax regime, we can distinguish:
   • real taxes - paid on general principles, depending on real income (for example, personal income tax, mineral extraction tax, etc.);
   • personal – calculated taking into account individual characteristics the payer if he is provided with any benefits (for example, personal income tax, inheritance or gift tax, capital gains tax, etc.).
3. It depends on who exactly the payer is whether the tax is intended for:
   • individuals - for example, personal income tax, water, transport, land, etc.;
   • legal entities (organizations) – personal income tax from employees, on water resources and so on.;
   • payments by both.

Indirect taxes: who pays, their properties and types

Another form of taxes, unlike direct taxes, relates to the sale of goods, services, and works. Its source is located within another payment that the consumer will make. The entrepreneur includes a certain markup in the price, which includes, in addition to the cost and profit share, also a part for paying tax.

Thus, indirect tax- this is a payment levied on the sale of goods, services or work, included in the form of one or another surcharge included in the price or tariff.

The payer of the tax is considered to be the owner of the enterprise - the manufacturer or organizer of the provision of services, but the tax will be generated from the funds of consumers, that is, in fact, the payer is the buyer of the product or service. In the case of indirect tax, the entrepreneur himself acts as a tax agent (collector).

NOTE! There are options where the indirect tax is not passed on to the consumer. For example, a buyer included VAT in the price of a product, but this price caused a decrease in demand and had to be reduced. In this case, the indirect tax will be paid partly from the entrepreneur’s profit, thereby becoming direct to some extent.

Properties of indirect taxes

Indirect taxes have the following features:

• full or partial inclusion– the surcharge can include both the entire tax and a certain part of it;
• entrepreneur's responsibility– in fact, the entrepreneur is an intermediary between the state and the actual payer of the tax, but it is he who will be asked for late or incomplete payment of the tax;
• closedness– the consumer does not know exactly what amount of the price of a product or service he pays to the state;
• steadfastness– it is impossible not to pay such a tax, since the consumer automatically provides funds for it by paying for a product or service;
• unevenness– such taxes are distributed unevenly; they are introduced mostly on goods and services for which there is increased demand.

Types of indirect taxes

1. Personal taxes(they are also called excise taxes) - established on goods of high demand, so that the state can receive a percentage of the excess profits of distributors or manufacturers into its budget. They also apply to goods, the excessive consumption of which can cause harm to health, in order to limit their sale, for example, alcohol and tobacco products. They also apply to some luxury goods. The personal tax is a percentage of the price at which a product is sold.
2. Universal taxes– are accrued based on the markup that is established on the product (service) at different stages of its production and sale. All goods are taxed, except for separately specified socially significant groups. An example is value added tax.

   Not subject to VAT:

   • certain medical products and services;
   • leasing premises to foreigners;
   • services for the education of preschool children;
   • archive services;
   • catering in medical and educational institutions;
   • passenger transportation within a city or other territorial unit;
   • funeral services;
   • some other types of services listed in paragraphs 9-30 of Article 149 of the Tax Code of the Russian Federation.
3. Fiscal monopoly– a fee paid by an individual or organization for certain legal actions of government bodies (the provision of services provided by law). Examples include fees for licenses, permits, registrations, paperwork, and sales taxes.

The combination of direct and indirect taxes makes up the taxation system Russian Federation.

The tax legislation in force in the Russian Federation is a complex system built on the basis of the interaction of many types of taxation for all types of businesses. Whatever system you work on individual entrepreneur or organization, they are obliged to pay in state treasury taxes, which are divided into two types: direct and indirect.

Indirect taxes, direct taxes received into the state treasury from the population and legal organizations of various types are its important, and, one might say, the most important component.
Direct and indirect taxes, examples of which will be given below, help fill the state treasury, which is the basis for the implementation of all necessary social payments, the conclusion of contracts, the construction of vital projects, etc. Their role in the normal functioning of the state cannot be overestimated.

All about direct taxes

What are direct taxes, how are they calculated, and what category of taxpayers are eligible for these deductions? This question interests almost everyone. Direct taxes are those that, in accordance with the tax legislation of the Russian Federation, are levied on both individuals and legal entities upon receipt of any profit. Also, this type of tax can be levied on property owned by the taxpayer. But this case includes only those situations in which the value of the property of a physical or legal entity gives rise to taxation.

Direct ones are withdrawn in different ways. It all depends on who the taxpayer is - an individual or a legal entity.

For civilians, direct tax is:

1. Income tax.
2. A piece of land owned by a person.
3. On the water used.
4. For personal vehicles.

List for legal entities tax collections is:

1. Value added tax on working personnel.
2. For the profit received.
3. For existing property.
4. For vehicles owned by a legal entity.
5. On owned land.
6. For business related to slot machines and so on.
7. To existing water sources.
8. For production natural resources from the bowels of the earth.

Since the tax office regularly receives reporting documentation, as well as declarations with various organizations and from individual entrepreneurs, the number Money, which should go to the state treasury, is calculated in advance.

In accordance with the legislation of our country, there is no need to pay taxes when receiving the following types of income:

1. Pension payments.
2. Benefits paid due to registration with the employment center at the place of residence.
3. Benefits related to pregnancy and childbirth.
4. Payments for donating blood (for donors).
5. Payments from spouses for minor children - alimony.
6. Payments for achievements in scientific activities.
7. Payments for achievements in various fields of art.
8. Monetary assistance from the organization to the employee’s family in the event of the latter’s death.
9. Cash assistance to victims of a natural disaster.
10. Proceeds from the sale of a home that has been the property of a civilian for more than five years. In the case where housing was purchased before 2016, it must be the property of an individual before sale for at least three years.

A detailed list of income subject to direct tax can be found in Article 217 of the Tax Code of the Russian Federation.

All about indirect taxes

Indirect taxes are taxes that are charged on top of the cost of a particular product. Their number is determined by the amount of profit received by the taxpayer. Thus, it turns out that a taxpayer who produces a particular product or provides any services must sell what it produces or provide its services at a value-added price for payment to the tax office.

Essentially, in in this case the real payer of taxes is the person who purchases the above-mentioned goods or services. Since it is he who pays the additional cost upon purchase.

And the manufacturer in this case is only an intermediary, helping to get tax accruals into the state treasury. When paying taxes, he pays only the amount of money that was “added” on top of the real cost of the goods sold or services provided.

A tax is a mandatory financial obligation payable to the government. The tax system is mainly divided into two broad categories direct tax and indirect tax, consisting of of various nature taxation.

Basis for comparison	Direct tax	Indirect tax
Meaning	Direct tax is referred to as a tax levied on a person's income and wealth and is paid directly to the government.	An indirect tax is referred to as a tax levied on a person who consumes goods and services and is paid indirectly to the government.
Overheads	A person who is subject to a tax burden.	The burden of the tax may be transferred to another person.
Types	Wealth tax, income tax, property tax. Import and export duties.	Sales tax, VAT, excise taxes, customs duties.
Payment evasion	Maybe	Hardly possible, since it is included in the price of goods and services.
Inflation	Direct tax helps in reducing inflation.	Indirect taxes contribute to inflation.
Charged from	Individuals, individual entrepreneurs, companies, firms	Consumers of goods and services.
Action	Progressive	Regressive

Definition of direct tax

A direct tax is levied on a person's income and wealth, and is paid directly to the government; the burden of such a tax cannot be shifted. The tax is progressive in nature, i.e. increases with income or wealth and vice versa. It taxes according to a person's ability to pay - the tax is levied on richer people. The tax is levied and collected either by the central government or local authorities.

There are several types of direct taxes, such as:

• Income tax.
• Wealth tax.
• Property tax.
• Import and export duties.

Definition of indirect tax

Indirect tax is referred to as a tax levied on a person consuming goods and services, paid indirectly to the government. The burden of the tax can easily be shifted to another person. A tax is regressive, increasing the demand for goods and services and vice versa. It is imposed on every person, whether he is equally rich or poor. Administration of the tax is carried out either through the central government or the regional administration.

There are several types of indirect taxes:

• Sales tax.
• VAT (value added tax).
• Excise tax
• Customs duty.
• Agricultural income tax.

How do direct taxes differ from indirect taxes?

1. The tax paid by the person on whom it is imposed is known as direct tax. A tax that is paid indirectly by the taxpayer is an indirect tax. A direct tax is levied on a person's income and wealth, while an indirect tax is levied on a person consuming goods and services.
2. The main difference between direct and indirect tax is the burden of direct taxes, it cannot be transferred to another person, while the liability of indirect taxes can be shifted.
3. Tax evasion is possible in case of direct tax if proper imposition of levy is not made but in case of indirect tax, tax evasion is not possible as the amount of tax is charged on goods and services.
4. Direct tax is levied on individuals, firms, and organizations. On the other hand, indirect tax is levied on the consumer of goods and services.
5. The nature of direct tax is progressive, indirect tax is regressive.
6. Direct tax helps in reducing inflation, but indirect tax sometimes helps in promoting inflation.

From an economic point of view

Direct tax refers to any level simultaneously imposed and collected from a specific group of people or organizations. An example of direct taxation is income tax.

Indirect taxes collected from someone or some entity other than the person or entity that is usually responsible for taxes.

A sales tax, for example, would not be considered a direct tax because the money is collected from merchants rather than consumers. In this economic context, the law may actually determine the person or persons from whom the tax will be collected, but has nothing to do with how the tax burden is distributed in the market. Who bears the economic burden of the tax itself will be determined by market forces and can be calculated by comparing the price of the product.

From a legal point of view

In a legal sense, the meaning of direct and indirect taxes changes:

• Direct tax applies only to property.
• Indirect taxes overlap with a wide range of rights, privileges and activities.

In this sense, the tax on the sale of property will be considered an indirect tax, and the tax on the property actually due will be a direct tax.

Similarities

• Paid to the state.
• Fine for non-payment.
• Interest (penalty) on late payment.
• Improper use may result in tax evasion and penalties.

Direct and indirect taxes have their own advantages and disadvantages. If we are talking about direct taxes, they are fair because they depend on a person’s ability to pay. Direct tax is economical as its cost of collection is less, but still it does not apply to all sections of the society.

The effect of indirect tax is easy to understand as it is included in the cost of products and services and along with this it has excellent coverage in every part of the society. One of the main advantages of indirect tax is high rate for harmful products in comparison with other goods necessary for life.

Tax literacy of the population and tax ethics today are one of the problems of the state’s fiscal policy. Many citizens, without delving into the essence of the functioning of the country, do not understand the need to pay taxes and why they are needed at all.

The state is a special institution designed to ensure fair coexistence of various social groups, and requires significant costs for its functioning. Taxes are designed to ensure the cost side of the management mechanism.

What are taxes for?

They are needed to perform the following functions:

• provision of health and education systems;
• for the progressive development of science, culture, art;
• to ensure the rule of law and order (ensuring the functioning of the judicial and law enforcement systems);
• to support social justice measures and support for the poor;
• for the necessary redistribution of capital between industries, social groups society;
• supporting the country's defense capability through the creation and maintenance of security forces (army, police, intelligence services, etc.), as well as the defense production complex;
• maintenance of the state administrative apparatus.

Classification

They are divided into the following types: direct action and indirect.

Direct

This type of taxation is carried out specifically with, as well as other amounts. Objects of taxation include also in the form of securities and buildings.

The transfer is made directly to the state treasury.

Indirect

These include taxes on sold services and goods:

• (payments included directly in the cost of a service or product);
• payments upon receipt of inheritance;
• customs duties;
• taxes paid on real estate transactions, securities and etc.

The calculated value is included in the cost of the product sold, received by the seller at the time of purchase, and then paid to the state. That is, this tax is paid by the end consumer, but paid by the seller.

You can find out more detailed information about these payments in the following video:

Categories of indirect payments

They are divided by nature and purpose:

• individual character, used for individual varieties or commercial types that provide high income when sold;
• universal, which apply to all goods, exceptions are allowed for certain types of them that are socially significant;
• customs payments in the form of duties.

In addition to the peculiarity that the payers are the buyers of goods, they are characterized by good collection, since they are included in the cost of the product and evasion is impossible.

However, it is not always possible to transfer them to the buyer. An increase in the fee or excise tax automatically reduces the level of demand for products, contributing to the formation of stale goods and illiquid stock. To avoid overstocking, the entrepreneur is forced to reduce the price, paying from his own profit. Consequently, the tax from indirect to some extent turns into direct.

Their features as a tool for economic development

Not so long ago, indirect taxes were viewed only as a negative phenomenon. However, it makes no sense to characterize them only as a financial burden on the population, since any fees are such. We can only talk about the wisdom of their use from the point of view of the impact on the social status of citizens and their ability to fulfill the function of filling the budget.

The advantage of these taxes is associated with their importance in the formation of the budget. However, they can become an effective lever for managing the economy in order to achieve certain financial results.

This is due to their following features:

• Quick collection, income to the budget. Immediately after sales are made, VAT and excise taxes are paid and contribute to filling the treasury, which provides funds for the expenditure side of the budget.
• Since these taxes cover the bulk of the turnover of products and services, it is most likely that they will be received in full. Stopping the process of realization is unrealistic, just like stopping life itself. The organization’s profit may not be received at all or may be skillfully underestimated.
• Sales of goods and services are more or less uniform on a territorial basis. This makes it possible to largely level out imbalances in the regional distribution of the budget revenue component. No one has yet succeeded in ensuring uniform development of all areas in world history; therefore, the use of indirect tax revenues is a certain airbag for regional budgets.
• They are capable of exerting a serious influence on the state. Their purpose is to meet the needs of infrastructural development of the region in order to increase the purchasing power of the population, which will lead to an increase in the tax base.
• They influence the population. By skillfully using the advantages of these payments to the budget, it is possible to influence the structure of consumption (and, as a result, production) in a particular region, stimulating the production of certain goods while restraining other areas.

The ratio of direct and indirect taxes

Impact assessment various types taxation in Russia is very significant not only for understanding economic development, but also for assessing possible application world experience. Naturally, this should not be an indiscriminate use of an attractive-looking system, but taking into account national characteristics economy, mentality of the population, consumption customs. It is necessary to take into account the current structure of the national fiscal system.

To develop effective and flexible system taxation needs to be determined effective interaction direct and indirect taxes, and specifically the effective contribution of each type.

The tax impact on business and the population of the country should be comfortable for both citizens and the state.

Today, world practice identifies four main systems based on the ratio of direct and indirect taxes:

1. Anglo-Saxon model is aimed at direct taxation of individuals, with indirect taxes accounting for a small part. In America, 44% of total revenue comes from income taxes. Similar techniques work in Canada, Great Britain, Australia, and many other countries.
2. Eurocontinental taxation systems are characterized high level deductions for social insurance needs, a high portion of revenues from indirect taxes.
3. Model of Latin American countries traditionally focuses on a large component from indirect payments. As prices rise as a result of inflation, which is typical for the region, tax deductions increase. This allows you to protect your budget to some extent.
4. Models mixed type are used by many countries to diversify the income structure; they help neutralize the impact individual species taxation. The peculiarity of the model is that the main revenues come from direct fees, but with a predominant share of revenues from business, rather than from income taxes.

The tax system in the Russian Federation is closer to the Latin American model with elements of the Eurocontinental one. Tax revenues from business account for about 70%.

Apparently, such a burden is heavy for entrepreneurs, but shifting part of the burden onto ordinary taxpayers is hardly possible at present due to the low purchasing power of citizens. The main reason should be considered the low efficiency of social production.

The category of indirect taxes and fees includes: value added tax, different types excise taxes, inheritance taxes, taxes on transactions with real estate and debt securities, customs and government duties. These types of fees are included in the cost of goods or services, are actually paid by buyers and are then transferred to the treasury.

Concept and features of indirect taxation

Indirect taxes are necessary to distribute the tax burden evenly between sellers and buyers. A taxable person (individual entrepreneur, legal entity) and a taxpayer are different entities. That is, indirect taxes perform the function of compensation, because The buyer pays the seller the amount of tax included in the cost of goods or services. The seller, in turn, is obliged to transfer the amount of tax received to the local budget before the first day of the month following the reporting quarter.

The peculiarities of indirect taxes are their high collection rate (any violations of trade transactions are detected very quickly), as well as the speed of transfer to the treasury.

The calculation of the amount of indirect taxes that must be transferred to the budget is carried out in accordance with the Tax Code of the Russian Federation.

Types of indirect taxes

Indirect taxation includes the following types of taxes:

• Value added tax (VAT). This is the amount that is added to the cost of products or services sold by the enterprise. The most commonly used tax rate is 18%; a number of children's and food products are subject to a 10% tax rate; exports are taxed at a zero rate. There are types of activities that are exempt from VAT.
• Excise taxes. A fee that is used in the production of goods (alcohol, tobacco products, fuel, cars) and is included in the cost of sales. The amount of excise taxes can reach 30-50% of the cost. There are universal excise taxes (for the entire turnover) and individual excise taxes (for a specific product or group of goods).
• Customs fees and duties (export, import, transit). Mandatory charges imposed on goods crossing a border. The size and list of payments are determined by the Customs Code of the Customs Union and depend on the purpose and classification of the goods and the value of the declared consignment.
• State duties. Fixed amounts to be paid individuals or companies for the provision of services by government bodies (registration of an individual entrepreneur or legal entity, notary services, fees when going to court, car registration, registration in the registry office, etc.).

Pros and cons of using indirect taxation

The advantages of indirect taxes are: quick replenishment of local budgets and general taxation (the consumer will in any case pay the tax when purchasing a product or paying for a service).

Disadvantages: indirect tax is not proportional to the income of the individual consumer, because is already included in the price of a specific product. People with high and low incomes must pay the same amount of tax.