1. Direct Taxes

These are taxes levied on income and wealth. These are taxes levied by the government directly on the incomes and wealth of individuals and profits of firms or businesses. It is paid by people who know and feel that they are paying taxes.

The main aim of direct taxation is to raise revenue and as an instrument of fiscal policy is a direct tax because the individuals or businesses (legal tax payer) on which the taxes are Ievied bear the impact and incidence of the taxes they pay directly.

Examples of Direct Taxes

1. Income tax: This is a type of direct tax levied on the incomes of individuals. Income tax is usually levied on a progressive scale in order to raise revenue and to redistribute income. The tax rate applied on the taxable income is both horizontal and vertical.
2. Corporate or Company tax: This is a direct tax levied on the profits accruing to companies. The tax rate charged on corporate profits is important because it determines the amount of profits left to be paid out as dividends to shareholders or to be reinvested. Into the business.
3. Housing loan fund (Credit Foncier): Workers in Cameroon surrender 1% of their salary to this fund with the hope that they will be able to be given loans to enable them construct their own house.
4. Capital gains tax: This is a tax levied on the surplus obtained from the sale of an asset or on the increase in the value of an asset between the time of purchase and the time of its sale. Taxable assets would include land, houses, shares, amongst others.
5.  Inheritance tax: This is a tax levied on a person's private wealth or assets being transferred to his beneficiaries. Inheritance tax is also known as capital transfer, estate duty or wealth tax. Wealth or inheritance tax can also be used as part of government-policy instrument to redistribute wealth within the community.
6. Cameroon Radio and Television (CRTV) tax: This is a tax on audio visual and it is levied on wages and salaries of workers above 50.000 francs CFA in Cameroon. This tax ranges from 750 francs CFA to 4450 francs CFA depending on the wage or salary level.
7. Cattle or Jangali tax: This is a tax levied on cattle and it is paid by the owners of the cattle in relation to the number of cows owned. It is usually a flat rate per cow.
8. National social insurance contribution: This is an amount paid in the form of tax deducted from the wages and salaries of individual. This amount enables them to, receive family allowance and pension during their retirement.
9. Poll tax: it is a type of tax operated on flat rate basis levied on the income of certain individuals not known by the government.

Other examples or types of direct tax may include; stamp duties payable on financial contracts, business licenses, fiscal stamps, toll gates, motor- vehicle licenses, and petroleum revenue tax.

                      Advantages of direct taxes

1. Source of revenue: Direct taxes constitute a significant source of revenue for the government. Since they are convenient, easy to collect and more certain, the. Government an easily estimate its revenue and hence plan spending becomes easy.

2. It is certain: The taxpayers are aware of the amount of tax to pay and when to pay it. This makes the payment of direct taxes convenient to the tax payers.
3. It is easy to collect: This is so because they are usually deducted at the source of income. For example; Income taxes are deducted before salaries and wages are paid to workers in Cameroon. This makes the collection of the taxes more convenient and cost effective.
4. It facilitates redistribution of income: Direct taxes are progressive in nature with built-in stabilizers. They are used as instruments of fiscal policy to redistribute income
5. The incidence of direct taxes is non transferable: lt falls directly on those who pay the taxes.
6. Price stability: Direct taxes can be used to regulate the rate of inflation or to take the economy out of a deflation.
7. Tax evasion is not possible: Since most of these taxes are deducted at the source of income, it becomes difficult to evade the payment of direct taxes.
8. Facilitates reallocation of resources: Direct taxes are often used to reallocate resources in the economy. The government can encourage production in certain sectors of the economy by reducing corporate taxes, by granting tax holidays or by granting subsidies and vice versa. These facilities will encourage the movement of resources to such sectors.

                               Disadvantages of direct taxes

1. It is disincentive to hard work: This means that more is taken in tax as one's income increases. This discourages hard work. This is why the tax is progressive in nature
2. It discourages savings: Direct taxes reduce the levels of individual disposable incomes and retained corporate profits. Consequently, savings and investment are reduced.
3. Self-employed can easily evade direct taxes: Direct taxes are easily evaded by people who are self-employed especially in the informal sectors of the economy e. g. Hawkers and income earners within the rural economy.
4. It discourages foreign investment: High company taxes discourage foreign investment in the economy. This is so because realized profits are considerably reduced by such taxes.
5. It reduces the level of consumption: Taxes on earned incomes reduce the level of disposable income. Consequently, the level of consumption is adversely affected.

2. Indirect Taxes

These are taxes levied by the government on goods and services. It is paid by people who do not know and feel that they are paying taxes. Like direct taxes, the main aims of indirect taxes are to raise revenue. It is an indirect tax because the impact of indirect tax falls on the legal tax payer and the burden or incidence of indirect taxes can be shifted by the legal tax payer or producer to the consumers of his goods or services. The extent to which the incidence of the tax can be shifted depends very much on the degree of elasticity of demand and supply of the mixed goods or services.

               Changes in indirect taxes are used as part of fiscal policy to regulate the level of total or aggregate demand in the economy. Indirect taxes are also known as outlay taxes or expenditure taxes because they are incurred when income is spent and the taxes form part of the purchase prices of goods and services bought by individuals and businesses. Consequently, indirect taxes are paid indirectly through the purchases of taxable goods and services.

Examples of Indirect Taxes

1. Tariffs or import duties: These are taxes levied on imported goods and services entering the country. They are a major source of government revenue especially in third world countries. Import or custom duties may be levied on quantity or value of goods

1. Ad valorem tax: Ad Valorem tax is an indirect tax levied as a percentage of the price or value of a unit of output I.e. 2% or 5% of the price of a good is paid in tax. It constitutes part of the final purchase price of a good. Examples of ad valorem tax include VAT, Sales tax, Excise duties and Import duties.
2. Specific tax: A specific tax is also an indirect tax levied at a fixed rate per unit of a good or quantity of goods. Again, it forms part of the purchase price of a good e. g-a tax of 4000 FCFA levied on one ton of imported wheat flour.

2. Sales tax: This is a tax levied on the sale of certain goods and services. It is often referred to as turnover tax. This tax is usually levied at the retail or whole sale stage of production and is usually incorporated into the selling price of a good or service.
3. Value added tax (VAT): This is an indirect tax levied by the government on the value added to a good. The tax may be based on the difference between the value of the output over the value of the inputs used to produce the good or based on the value added at each stage of production of a good. The rate of VAT is 19.25% in Cameroon. VAT was introducing in Cameroon in 1988/89 fiscal year to replace the turnover tax.
4. Excise duties: These are taxes levied by the government on home produced goods like cigarettes, alcoholic drinks. Hydrocarbon oil, amongst others. Excise duties may be ad valorem or specific and they are intended not only to raise revenue but to regulate the consumption of particular goods and services.
5. Export duties: These are taxes levied by the government on exports.
6. Betting and gaming tax: Betting and gaming is a tax levied on agreements and lottery games such as PMUC, TELECASH, PARI SPORTIF, and PARIFOOT etc. They are intended to regulate this form of economic activities and to raise revenue.

                                 Advantages of indirect taxes

1. It is a source of government income: It is levied to raise income to finance public expenditure.
2. It prevents the consumption of harmful goods: Indirect taxes are levied to prevent the consumption of harmful goods in the country.
3. It protect infant industry: lt is levied to protect domestic or infant industry
4. It prevent dumping: Indirect taxes are levied to prevent dumping of goods into the country
5. It is not easily evaded: It is not easy to avoid or evade indirect taxes that are levied on goods and services. This is because it is levied on goods of necessity (inelastic goods)
6.  Less noticeable: Indirect taxes are less noticeable. This is. Because they mostly constitute small proportions of the purchase prices of goods and services and the buyers hardly take note of the taxes they pay.
7. There is flexibility: Indirect taxes are more flexible than direct taxes. They are easily adjusted to suit government's objectives.
8.  It has a wider tax base: Indirect taxes have a wider tax base than is the case with direct taxes. Consequently, indirect taxes constitute a significant source of revenue to the government.
9. Convenient to collect: The collection of indirect taxes is less cumbersome since the method of payment and time is less worrisome to the taxpayers.
10. Less disincentive effect: Indirect taxes have very little adverse effect on the taxpayers.

                                       Disadvantages of indirect taxes

1. Indirect taxes are regressive: Indirect taxes fall more on the poor than the rich as they both buy and consume the same taxable goods and services. This tends to widen the gap between the poor and the rich.
2. Indirect taxes are inflationary: Indirect taxes are inflationary because they are easily shifted onto consumers of taxable goods and services through increased prices.
3. There is high cost of administration: Some indirect taxes are complex and costly to administer. An example "Is VAT whose administration is complex and costly”.
4. Problem of incidence: The final burden of an indirect tax is not known. This is because a shift of the burden of the tax depends on the elasticity of demand and supply of the taxed good or service.
5. They are uncertain: Consumers of taxable goods or services are not certain of how much they pay in tax. The government cannot also plan on the yield because it depends on sales.
6. Indirect taxes are discriminatory: Indirect taxes are discriminatory because they are paid only by those who consume taxed goods and services.
7.  Disincentive to businesses: Indirect taxes are harmful to businesses which produce goods or services with elastic demand.