Which statement best defines a direct tax?

Which statement best defines a direct tax?

• A. Taxes paid to the government by the person liable for them (income tax, tax on profits)
• B. Taxes borne by one party but collected and paid to the government by another party
• C. Taxes identified by the tax base
• D. Incidence classification

Answer: (A)

Direct taxes are taxes where the person who is legally liable for the tax also pays it to the government. There’s no middleman; the taxpayer directly funds the revenue. Examples include income tax and tax on profits. The idea described in the other statement—someone bears the tax in theory but another party collects and pays the government on their behalf—refers to indirect taxes, where the burden can be shifted to someone else (like the consumer ultimately paying VAT through the price). The remaining options don’t define direct taxes: tax base identification is a feature of many taxes, and incidence classification is a broader concept about who ultimately bears the burden, not who pays the tax to the government.

Direct taxes are taxes where the person who is legally liable for the tax also pays it to the government. There’s no middleman; the taxpayer directly funds the revenue. Examples include income tax and tax on profits. The idea described in the other statement—someone bears the tax in theory but another party collects and pays the government on their behalf—refers to indirect taxes, where the burden can be shifted to someone else (like the consumer ultimately paying VAT through the price). The remaining options don’t define direct taxes: tax base identification is a feature of many taxes, and incidence classification is a broader concept about who ultimately bears the burden, not who pays the tax to the government.