It is conventional to describe direct taxes as taxes where the person legally liable to pay the tax is also the person whose income or welfare is reduced as a result of its imposition: while indirect taxes are those where liability can be shifted to someone else. This distinction is essentially an arbitrary one. All taxes can be shifted to some degree: only in exceptional circumstances can any agent shift a tax completely. In common usage, indirect taxes are those which are paid by retailers, wholesalers or manufacturers, but believed to be shifted toward final consumers. In this entry indirect taxation is regarded as synonymous with commodity taxation.
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