Indirect Taxes
Indirect taxes are duties on specific goods and services, adding to their prices. Examples include VAT (value-added tax), excise duty on fuel and alcohol, and stamp duty. Tax is collected by sellers from consumers but remitted to government. The tax burden is shared between consumers and producers depending on elasticity.
Real World
The UK government raised the sugar tax (Soft Drinks Industry Levy) in 2018, causing Coca-Cola to reformulate Fanta with less sugar rather than pass the full 24p-per-litre charge to consumers.
Exam Focus
Draw a tax wedge diagram showing both consumer and producer burden — examiners expect you to label the incidence split.
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