Business, Legal & Accounting Glossary
Direct tax in economics refers to that type of taxes that are levied directly on any organization or an individual. Direct tax though in a colloquial sense refers to that type of taxes that are paid directly to the government by any individual. Direct tax in economic terms and colloquial terms do not always match.
In a colloquial sense, direct taxes are imposed on any individual and that individual has to pay taxes directly to the government, which is often accompanied by a tax return petition. Some of the examples of direct taxes can be income tax, several types of corporate taxes and transfer taxes like the estate tax and gift tax. Sometimes direct taxes are referred to as taxes that cannot be transferred to any other person.
In an economical sense, income taxes are a major type of direct taxes that are collected directly from any individual or organization. In the United States, there is a different meaning for direct taxes. Conventionally, according to US constitution direct tax can be referred to as a tax on property. The reason being ownership, for owning any type of property a certain amount of money is to be paid to the government which is in the form of property tax. An example of this type of tax can be ordinary real estate property tax, which is imposed on individuals and calculated on the basis of assessment done on January 1st of every year. In the late 1800s, the US constitution started treating income coming from the property as income tax. This income tax was treated as direct tax and estate or property tax was treated as a transfer tax, which is an indirect tax.
An income tax is a type of tax that is charged on the monetary income of any individual, corporations, or other legal entities. There are various income tax systems that exist in an economy. Various types of income taxes are present with unstable levels of tax frequency. There are three types of income taxes progressive, proportional, and regressive. Corporate income tax or profit tax is also a type of income tax charged on the income of companies or business houses. Income taxes are charged on the annual income of any individual and corporate income taxes are charged on the net income of any company.
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This glossary post was last updated: 26th March, 2020 | 1 Views.