Indirect tax
Definition. An indirect tax is a tax levied on the production or sale of goods and services rather than on income or wealth, so that it is collected by firms and can be passed on to consumers through higher prices. Examples include the goods and services tax and excise duties on specific products.
An indirect tax raises the cost of production and shifts the supply curve to the left, with its incidence shared between producers and consumers according to the relative elasticities of demand and supply.
This term belongs to Indirect Taxes and Subsidies in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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