Definition of Direct tax:
Direct taxes are based on the ability-to-pay principle. This economic principle states that those who have more resources or earn a higher income should pay more taxes. The ability to charge taxes is a way to redistribute the wealth of a nation. Direct taxes cannot be passed onto a different person or entity; the individual or organization upon whom or which the tax is levied is responsible for the fulfillment of the full tax payment. Direct taxes, especially in a tax-bracket system, are thought by some to be a disincentive to work hard and earn more money because the more money a person earns, the more taxes they pay.
A tax, such as income tax, which is levied on the income or profits of the person who pays it, rather than on goods or services.
A government levy on the income, property, or wealth of people or companies. A direct tax is borne entirely by the entity that pays it, and cannot be passed on to another entity.
Examples include corporation tax, income tax, and social security contributions. Unlike consumption taxes (see indirect tax), direct taxes are based on the ability to pay principle but they sometimes work as a disincentive to work harder and earn more because that would mean paying more tax. See also progressive tax.
A direct tax is paid directly by an individual or organization to the imposing entity. A taxpayer, for example, pays direct taxes to the government for different purposes, including real property tax, personal property tax, income tax, or taxes on assets.
How to use Direct tax in a sentence?
- The direct tax represented the largest section of the taxes paid this quarter so we were happy with our profits.
- You should always know how much the direct tax will be on a product so that you can factor that into your accounts.
- I realized that we would be given a direct tax on all of our profits, which made me angry because I hated taxes.
- The Scottish National Party has called for a return to direct taxes like income tax, under which the rich pay more.
- There are also indirect taxes, such as sales taxes, where a tax is levied on the seller but paid by the buyer.
- Direct taxes include income tax, property tax, corporate tax, estate tax, gift tax, value-added tax (VAT), sin tax, and taxes on assets.
- A direct tax is paid by an individual or organization to the entity that levied the tax.
Meaning of Direct tax & Direct tax Definition