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 KCSE business studies paper 2 revision questions and answers set 2

Explain five differences between direct tax and indirect tax

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Answer Text:
-Direct tax is imposed on personal and corporate income while indirect tax is imposed on price of products
-Direct tax varies depending on the income earned while indirect tax is uniform to both high income earners and low as well
-Direct tax is economical in collection from the source while indirect tax is expensive to administer and collect
-Direct tax is narrow based and thus lacks variety/diversity while indirect tax is broad based
and includes a variety of types
-Direct tax discourages working hard to earn extra income while indirect tax encourages working hard to earn extra income.
-Direct tax can easily be evaded while indirect tax is not evadable