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Taxation is the process by which the people pay the expenses of carrying on the government. Many kinds of taxes are used in the world. The main taxes can be divided into taxes paid on income and capital, called “direct” taxes and those paid when money is spent, called “indirect” taxes. Indirect taxes are paid on goods and services.

The taxes are paid by the shops or manufactures, but then passed on to the consumers in the form of higher prices. The advantage of this tax is that it is directly in line with inflation. If the prices rise, so does the tax.