Difference Between Direct Tax And Indirect Tax in Vietnam

00:54, 12/07/2024

Tax is considered the primary source of revenue for the state budget; it is a mandatory monetary contribution, characterized by state authority, non-reciprocity, and no direct return, paid by individuals and organizations to the state when certain conditions are met.

Based on the means of collection, taxes are classified into two main types: direct tax and indirect tax. Although both are sources of state budget revenue from taxes, they have very distinct characteristics. To be specific:

Criteria	Direct Tax	Indirect Tax
Definition	Taxes that are directly regulated into the income or assets of the taxpayer. In this case, the taxpayer is also the tax bearer. Example: Personal Income Tax (PIT); Corporate Income Tax (CIT)	Taxes that are indirectly regulated not through the prices of goods and services, and thus, the taxpayer is not simultaneously the tax bearer. Example: Value Added Tax (VAT); License Tax; Special Consumption Tax; Import-Export Tax.
Impact Level on the Economy	Has little impact on market prices as it is only levied on business results and does not increase the selling price of goods and services	Directly affects market prices because the tax is directly added to the selling price of goods and services
Management Level	Difficult to collect, easy to evade, primarily cash transactions; the state cannot control the actual income of the taxpayer.	Easy to collect as it is included in the selling prices of goods and services.

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