This question was also popular with the candidates. The candidates were required to differentiate between direct and indirect taxes, classify some taxes into direct and indirect taxes and to state some merits of indirect taxes in the (a), (b) and (c) parts of the question respectively. Most of the candidates were able to differentiate between direct and indirect taxes and state the merit of indirect taxes in the (a) and (c) parts of the question but majority had difficulty in classifying the taxes in the (b) part of the question. Candidates
scored relatively high marks in this question. Candidates were expected to provide the following answer to score maximum marks in this
question.

(a) A direct tax is a tax levied on the incomes, profits and properties of individuals and organizations while an indirect tax is imposed on goods and services that are imported, exported or produced locally.

C:

1. The payer is not conscious of how much he is paying since the tax element is included in the price of the goods or services.


2. They are not disincentives to work because the individual does not know how much he is paying.


3. They are major source of government revenue since everyone buys goods or pays for services.


4. They promote a sense of social responsibility because they have a wider coverage.


5. They are difficult to evade because buyers cannot avoid paying them.


6. They are easier and cheaper to collect since the collection points are few.


7. They help to restrict the consumption of harmful products e.g. cigarettes.


8. They can help to protect infant industries by imposing tariffs on imported substitutes