direct tax definition

direct tax

Government levy on the income, property, or wealth of people or firms. A direct tax is borne entirely by the entity that pays it, and cannot be passed on to another entity; for example, corporation tax, income tax, and national insurance contribution. Unlike the consumption taxes (see indirect tax), direct taxes are based on 'ability to pay' principle but (being very obvious to the tax payer) they sometimes work as a disincentive to work harder and earn more because that would mean paying more tax.

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