What is the primary purpose of indirect tax?

The primary purpose of indirect tax is to raise revenue for the government without directly taxing individual income or profits. Unlike direct taxes that are assessed on an individual's or organization's earnings, indirect taxes are applied to the sale of goods and services. Examples of indirect taxes include value-added tax (VAT), sales tax, and excise duties. These taxes are generally included in the price of the product or service, which means the consumer pays the tax indirectly at the point of sale.

This method of taxation allows governments to generate revenue while potentially minimizing the political resistance that can accompany direct taxation, which can be more visible and personal to taxpayers. Indirect taxes are also seen as a way to influence consumer behavior by making certain goods more or less expensive, thus indirectly impacting consumption patterns.

While regulating market prices and supporting international trade agreements may be important governmental objectives, they do not represent the primary function of indirect taxation. The focus remains on raising funds for public services and infrastructure without imposing a direct burden on individual incomes.