Which statement describes indirect taxes?

• A. Taxes on earnings
• B. Taxes on wealth
• C. Taxes imposed on one section of the economy, but paid by another
• D. Taxes on property transactions

Answer: (C)

Indirect taxes are taxes charged on goods and services rather than on income or wealth. They are collected from sellers at the point of sale, but because they raise the price of what is bought and sold, the economic burden often ends up being borne by consumers who pay higher prices.

The statement describing a tax that is imposed on one part of the economy but paid by another captures this idea of shifting who bears the cost. In practice, taxes like VAT or excise duties raise the price of goods, and although the government collects the tax from producers or sellers, the ultimate payment comes from buyers.

Taxes on earnings and taxes on wealth are direct taxes paid directly by individuals based on income or net worth. Taxes on property transactions are taxes on a specific transfer; while they affect prices in the market, the defining feature of indirect taxes is the incidence that shifts the burden through prices rather than being tied to personal income or wealth.