Hidden Taxes - Watch Out

What Is A Hidden Tax?

A hidden tax is one that is not visible to the taxpayer. It is mostly levied on a consumer goods without the knowledge of the final customers. This usually starts from the production process;  the hidden taxes are levied on the goods during production which would in turn increase the cost of that good when it is sold. This is referred to as a hidden tax because the final customers have absolutely no knowledge of the existence of the tax or that they are paying a higher price for the goods.

 

Types Of Hidden Taxes

  • Corporate Income Tax: Corporate income taxes are usually levied on a company's profits, the shareholders and employees, this ultimately reduces the amount they would get in form of salaries. The rate of this tax varies from country to country, it is usually not fixed.

  • Tariff/Import Tax: Tariff or import taxes are levied on goods that are brought into a country. A tariff is a tax on imports or exports between sovereign states. The tax is imposed with the aim of encouraging and protecting domestic industry. It can also serve as a form of revenue for the government.

  • Sin Tax: The taxes levied on consumer goods that are deemed to be harmful to the society are called sin taxes. Examples of goods like these are cigarettes, fast food, gambling, pornography and alcohol. The taxes are enforced with the aim of reducing the purchase of these items as they can be harmful to the consumer in the long run.

 

There are other types of hidden taxes as well, especially prevalent in Australia is a luxury tax applied to highly priced cars.