What are the advantages of direct taxes

Economy for trainees: direct and indirect taxes

Usually nobody likes to pay taxes. But even if direct taxes could be avoided in some way, indirect taxes are nearly impossible to do. But what are direct and indirect taxes?

In the case of direct taxes, the tax debtor corresponds to the tax payer. That sounds very formal at first, but it means nothing more than that the taxes are set directly with the tax debtor and are to be paid directly by him. These direct taxes include, for example, wage tax, income tax or corporation tax, as well as vehicle tax or the solidarity surcharge. Anyone who is employed as a "normal" employee in Germany is subject to income tax. He cannot avoid this wage tax either, as the employer has to deduct the wage tax directly from the gross wage and transfer it to the tax office.

Indirect taxes are also often referred to as excise taxes because they are incurred when buying goods and services. Typical examples are sales or energy taxes. In the case of indirect tax, there is a difference between the tax debtor and the taxpayer. The tax debtor must provide the service, but can pass it on to another carrier. This is the case, for example, when a company is legally obliged to collect taxes on the sale of goods and pay them to the state. In this case, however, the tax burden can be passed on to customers (other companies or private buyers). In this way, the customers de facto bear the economic burden and not the tax-paying company.

In contrast to direct taxes, which can also be used as a distribution policy instrument for the purpose of redistribution through the progression of wage and income tax, for example, there is no differentiation in indirect taxes according to the taxpayer's capacity to pay. That means, no matter who buys a certain product and no matter how high their income and assets are, the tax to be borne is the same for everyone. That is why indirect taxes are often referred to as anti-social in the public debate. On the other hand, direct taxes have the disadvantage that they entail significantly higher administrative costs on the part of the state and taxpayers, as many special regulations (exemptions, progressions, etc.) often have to be taken into account here.