WAEC Economics 2013 Theory — Question 7

Model answer

(a) Direct taxes are levied on incomes, properties and profits of firms/individuals; they are not transferable to another party. Indirect taxes are levied on goods and services, and their burden is transferable (e.g. from seller to buyer). (b) Advantages of indirect taxation: (i) It is easy to collect. (ii) It is not easy to evade. (iii) It generates income for the government. (iv) It is used to correct consumption patterns (e.g. discouraging consumption of harmful goods via high taxes). (v) It is used to protect infant/local industries from foreign competition (via tariffs). (vi) It does not discourage people from working (unlike high direct/income taxes).