direct tax

  

Definition

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.


Use direct tax in a sentence

  • You should always know how much the direct tax will be on a product so that you can factor that into your accounts.

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  • I realized that we would be given a direct tax on all of our profits, which made me angry because I hated taxes.

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  • The direct tax represented the largest section of the taxes paid this quarter so we were happy with our profits.

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