WAEC Economics 2014 Theory — Question 22

Model answer

1. A direct tax is levied directly on the income or wealth of an individual/entity (e.g. income tax), while an indirect tax is levied on goods and services (e.g. VAT, sales tax). 2. The burden of a direct tax cannot be shifted to another person, while the burden of an indirect tax can be shifted (e.g. from seller to buyer through the price of the good).