direct tax

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.