Taxes on the income and wealth of individuals and firms are called what?

• A. Direct Taxes
• B. Indirect Taxes
• C. Subsidy
• D. Tax

Answer: (A)

Direct taxes are taxes charged on income and wealth and paid directly by the person or firm to the government. This means the burden falls on the same entity that earns the income or holds the wealth, with examples like income tax and corporation tax. Indirect taxes, by contrast, are levied on goods and services and passed through to consumers via prices. A subsidy is not a tax at all but a payment by the government to support production or consumption. While “tax” is the general term, the specific label for taxes on income and wealth is direct taxes.