Advantages and disadvantages of indirect taxes

Advantages (Merits) of Indirect taxes

1. They have a wider coverage. That is, they cover a variety of tax bases hence yielding more tax revenue to the
2. They are used to discourage the production and consumption of  harmful products  for example alcoholic drinks, cigarettes etc.
3. They are more This is because they involve low costs in assessment, administration and collection as compared to direct taxes.
4. They are flexible. They are easily adjusted according to the government policies and performance of the
5. They are used to protect domestic infant industries by charging high import duties. This promotes the creation of employment opportunities in the
6. They are convenient to the tax payer. This is because it is only paid when the person buys the commodity.
7. They are used to improve on the Balance of payment position of the country. This  is done by imposing heavy taxes on imports to discourage their importation.
8. They are difficult to avoid and evade. This is because they are included in the prices of consumer goods and services.
9. They are useful in resource allocation and income re-distribution. This is done by the discriminatory taxation where some commodities are taxed highly while other commodities are taxed less to encourage their
10. They can be used to check on imported This done by imposing heavy import taxes on commodities from countries experiencing inflation so as to discourage their importation.
11. The tax burden of indirect taxes is not directly felt by the tax payer. This is because they are paid as the tax payer consumes the

Disadvantages (Demerits) of Indirect taxes

1. They tend to be inflationary. This is because they increase the prices of commodities taxed especially when they are imposed on essential
2. They are regressive in nature. The rich and the poor pay the same amount of tax and therefore they fail to fulfill the canon of
3. High indirect taxes discourage the consumption of commodities due to high prices. This discourages production and investment hence
4. It is difficult to determine revenue from indirect taxes. This is because it is hard to accurately determine the effect of such taxes on demand and supply of
5. They are hard to assess, understand and administrator for example A.T.
6. They violate consumer sovereignty. This is because they increase the prices of consumer goods which force consumers to opt for cheap inferior
7. Import duties discourage in inflow of scarce and cheap commodities which may be lacking in the This leads to low standards of living for the local consumers.
8. They inconvenience the tax payers. This is because some indirect taxes are paid before the commodities are