Understand the difference between direct and indirect taxes. A direct tax is on income or wealth. An indirect tax is on spending. Classify each option.
Full Answer
D.Value added tax✓ Correct
Indirect taxes are taxes on expenditure. Value Added Tax (VAT) is a tax added to the price of most goods and services. The other options are direct taxes: Corporation tax is on company profits, and Income tax and National Insurance are on individual earnings.
Common mistakes
Confusing the different types of taxes. A good way to remember is that you pay indirect taxes 'indirectly' through the seller of a good or service.
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