Question

Recently, the government noticed that the consumption of cigarettes has increased among working individuals. To counter this increase, the government decides to raise the cost of cigarettes by increasing the excise tax on them. After six months, the government observes that the consumption of cigarettes has decreased to some extent. Which type of taxation did the government use? A. direct tax B. indirect tax C. progressive tax D. proportional tax

Answer 1

I would say it is indirect tax, since everything else is wrong, and it is not based on the income of the person who gets taxed, its for everyone, and is collected from the stores that sell cigs.

Answer 2

Option B. Indirect tax.

Step-by-step explanation:

An indirect tax is collected by one entity in the supply chain (usually a producer or retailer) and paid to the government, but it is passed on to the consumer as part of the purchase price of a good or service. The consumer is ultimately paying the tax by paying more for the product.

In the case of this example, the supply chain would be the stores that sell cigarrettes. The consumers end up paying more for each cigarrette they buy, and the money registered for tax goes to the government.