Malaysia's Tax System (Essay Sample)

Difference between Direct Taxation and Indirect Taxation
Direct taxes are financial charges directly levied on individuals and are usually based on the individual’s ability to pay as measured by net wealth, consumption, or income. On the other hand, indirect taxes are financial charges levied on the consumption or production of services and goods or transactions such as exports and imports. 
Direct taxes operate on the principle of ability to pay and are progressive; that is, an increase in income leads to an increase in tax and vice versa. In contrast, indirect tax is not based on the notion of ability to pay and are regressive; that is, each class of people equally bears the tax burden. 
The imposition and collection of direct tax are from assesses such as individuals, whereas assesses in indirect tax don’t directly pay to the government. Rather it is imposed on services and goods then collected by an intermediary on behalf of the government and deposited (Surbhi, 2021).
A direct tax cannot be shifted to a different entity or person; the organization or individual is responsible for paying the tax levied. In contrast, indirect tax can be passed on to another person, for example, sales tax paid by the buyer in a retail setting. 
Direct taxes help control inflation; that is, the government increases the tax rate when inflation is on the uptrend, leading to a decline in demand, thus reducing inflation. On the other hand, the indirect tax causes cost-push inflation as it causes unequal distribution of income due to its regressive nature.