Question

“Tax revenue collection of the government may be categorized under two heads.”

State and explain the two heads of tax revenue.

Answer 1

Tax revenue collection by the government may be categorized as:

• Direct Taxes: It refers to those taxes whose impact and incidence lie on the same entity. In other words, the liability of paying direct taxes can’t be shifted.
• Indirect Taxes: It refers to those taxes whose impact and incidence may lie on different entities. In other words, the liability of paying indirect taxes can be shifted.