Direct and Indirect Taxes: Direct taxes are defined as those taxes levied immediately on the property and incomes of persons and which are paid directly by the consumers to the state. Thus, income and wealth taxes, estate
duties, and toll taxes paid directly to the state form the group of direct taxes.
All other taxes would be grouped as indirect, i.e. those whose burden can be shifted (like sales tax and excise duties). These are imposed upon and collected from producers and sellers. But producers and sellers can shift the burden of these taxes on to the consumers. However, when these taxes are passed on to the consumers, they indirectly tax the income of the consumers.
Proportional, Progressive, and Regressive Taxation: A tax may be proportional, progressive or regressive according to the relationship between its rate structure and the income, wealth, and economic power of the tax-payer. A tax is proportional, progressive or regressive according to the percentage of the tax to the tax payer’s income. Proportional Taxation: If the tax is the ‘Same percentage’ on all incomes, large or small, it is called proportional taxation. Progressive Taxation: In this system, the rate of tax goes on increasing with every increase in income. In other words, lower income is taxed at a lower percentage, whereas higher income is taxed at a higher percentage. Regressive Taxation: If the rate of tax decreases with an increase in income, it is called regressive taxation.
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