Direct Tax vs. Indirect Tax

TAXATION QUESTION 1994

Distinguish a direct from an indirect tax.

SUGGESTED ANSWER:

A DIRECT TAX is one in which the taxpayer who pays the tax is directly liable therefor, that is, the burden of paying the tax falls directly on the person paying the tax.

An INDIRECT TAX is one paid by a person who is not directly liable therefor, and who may therefore shift or pass on the tax to another person or entity, which ultimately assumes the tax burden. (Maceda v. Macaraig, 197 SCRA 771)