Abstract
Tax issues are, at times, buried in the WTO under different names or misleading labels, and may be mishandled or mischaracterized because of historical misunderstandings that no longer apply. One issue, which this author believes has been interpreted incorrectly, is that of the distinction between direct and indirect taxation, and the treatment of the two under the GATT, a problem that emerges because of the fragmentation and isolation between the two fields, tax and trade. The fact that tax issues are handled outside the WTO has left the WTO with old foundations and unexamined bases for allowing outdated concepts to continue living under the WTO. It is very safe to state that the differentiation between direct and indirect taxes is a disputed issue within the tax community. Yet, it seems undisputed within the WTO. If there were a tax agreement, tax department, and tax staff, more attention would have been given to this issue and would have been reasonably addressed. The isolation between the two regimes has led to this sort of distortion. After presenting the relation of direct and indirect taxes to the WTO, this chapter will offer an overview of the literature and theoretical foundation behind the distinction between direct and indirect taxes.