Which statement defines a direct tax?

Which statement defines a direct tax?

• A. It is levied on the income of the company only
• B. It is levied directly on the person who is intended to pay the tax
• C. It is levied on goods and services
• D. It is collected by the government at year-end

Answer: (B)

Direct taxes are charged on the person or entity who is legally responsible for paying the tax, and the burden typically cannot be shifted to someone else. The statement that a direct tax is levied directly on the person who is intended to pay the tax captures this idea exactly. The other options don’t fit: a tax on the income of a company only is too narrow and ignores individuals who can also be direct taxpayers; a levy on goods and services describes indirect taxes, where the tax can be passed on through prices; collecting at year-end doesn’t define direct versus indirect taxes and timing varies.

Direct taxes are charged on the person or entity who is legally responsible for paying the tax, and the burden typically cannot be shifted to someone else. The statement that a direct tax is levied directly on the person who is intended to pay the tax captures this idea exactly.

The other options don’t fit: a tax on the income of a company only is too narrow and ignores individuals who can also be direct taxpayers; a levy on goods and services describes indirect taxes, where the tax can be passed on through prices; collecting at year-end doesn’t define direct versus indirect taxes and timing varies.