Question

State two differences between the tax on income and tax on the commodity.

Answer 1

Differences between the tax on income and tax on commodity:

1) A tax on income is paid directly to the Government by the person to whom it is imposed. Hence, the tax on income is known as a direct tax. It cannot be shifted on to any other person. According to the ability of the taxpayers, these taxes are levied.

2) A tax on the commodity is paid to the Government by one person, but the tax burden is borne by another person. Hence, the tax on the commodity is known as the indirect tax. It can be shifted on to the other person. The ability of the taxpayers is assessed indirectly in this taxation.