The tax paid by a business firm or entrepreneur to the government by collecting it from its customers or consumers is called direct tax. For e.g. the shopkeeper charges the price of a good by adding the tax on it to its customers. Such tax is paid to the government. Advantages and disadvantages of such tax are listed below:
Advantages:
- The government collects the tax directly from the business firm or shopkeepers, it does not have to trouble much.
- For example: It is easy to collect tax from the hotels rather than the customers.
Disadvantages:
- People suffer from double economic burden as they have to pay both the price of the goods as well as the tax.
- For example: They are charged for good or lodge facility in the restaurant or hotel as well as the tax to the government which looks quite irrelevant.