Direct and Indirect Taxes and Ways of Improving Collection by the State:

• Direct Taxes: A direct tax is one that the taxpayer pays directly to the government. These taxes cannot be shifted to others. A homeowner, for example, pays personal property taxes directly to the government. In a general sense, a direct tax is imposed upon an individual person (juristic or natural) or property (e.g., real and personal property, livestock, crops, wages).
• Indirect Taxes: An indirect tax is imposed upon a transaction, such as a sales tax or a value-added tax (VAT), which is paid by consumers when they purchase goods or services. The tax is collected by intermediaries (e.g., retailers) from the person who bears the ultimate economic burden of the tax (e.g., consumers).

(2 marks)

Ways to Improve Tax Collection:

1. Educating taxpayers: Providing education about compliance and the benefits of paying taxes to the nation.
2. Ensuring regular updates to the taxpayer registry: Keeping an updated registry of taxpayers to improve the accuracy of tax assessments and collections.
3. Simplifying the tax system: Making the tax system simpler to encourage formalization and compliance, especially among small businesses and individuals.