What is hidden tax?
Hidden tax is a charge imposed on individuals or entities that is not easily visible to those affected. Because hidden taxes are often disguised in other charges and may be difficult to detect by regular taxpayers.
Types of Hidden Tax
Hidden taxes can come in different forms, such as excise duties, import tariffs, value-added tax (VAT), estate taxes, and income taxes at both local and federal levels.
Excise duties are a type of indirect tax imposed on the production or sale of certain goods and services. They are charged on products such as tobacco, alcohol, gasoline, motor vehicles, railway tickets, and gambling activities. The revenue collected from these taxes is mainly used for public expenditure projects.
Import tariffs are customs fees levied on imported goods as they enter a country's border from abroad; these fees are based on weight or value of the goods being imported. Tariffs may also be used to protect domestic industries from competition abroad by making imported products more expensive than those produced locally.
Value-added Tax (VAT) is an indirect consumption tax applied to most goods and services purchased in the European Union (EU). It is collected incrementally at different stages of production with each participant collecting VAT on their sales and paying it back to the government less any amount already paid for inputs by their customers further up the supply chain.
Effects of hidden tax
Hidden taxes are taxes that go unnoticed by the average person, and oftentimes even by policymakers. These taxes can take many forms including increased user fees or other indirect costs, such as higher prices for goods due to increases in the cost of production. Hidden taxes can have significant effects on government budgets, while also creating an environment of inequity between different social groups. Consequently, it’s important to recognize these hidden taxes so that all levels of society understand their full financial impact.