Explain the concept of elasticity with respect to Direct Tax and Indirect Tax

Direct Tax:

  • Impact and incidence is on the same person e.g. PAYE, imports or exports, corporate tax etc.
  • Tend to be elastic

Indirect Tax:

  • Impact and incidence falls on different persons.
  • Tend to be inelastic since these taxes are imposed mainly on the necessities examples
    are VAT, custom duty etc.
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