THE classification of a tax as indirect or direct usually hinges upon the point of its incidence. Indirect taxes are paid by a person who is expected to recoup himself directly from others. The distinction is purely arbitrary, for the resistance against shifting a tax often converts part of an indirect tax into a direct tax. Similarly, a so-called direct tax can sometimes be passed on; for example, the income tax paid by a firm is regarded as part of its costs, and endeavour will be made to cover these costs by increasing the prices of its products. The reduction of income tax will enable prices to fall. There is, therefore, no clear-cut division between direct and indirect taxes.