What Is Direct Taxes in Economics

The largest indirect tax – and indeed the most important source of revenue overall – was the Alcabala, the sales tax. Legally, the Alcabala was payable by all regardless of their social status and applied to each transaction at the same rate of 10%. In practice, this has never been applied, as it would have been both extremely laborious and impractical for a modern economy to collect them. Instead of direct collection, the king opted for one of two systems used at different times or sometimes simultaneously in different parts of the kingdom. The first option was to abolish the collection of the tax through an agreement called arrendamiento. Cities have often rejected tax farming because the agreement made tax farmers the remaining claimants of the amounts collected, inciting them to behave too zealously or outright abusively, in the hope of crowding out additional taxes. The alternative, which became increasingly common in the sixteenth and seventeenth centuries, was an annual payment negotiated between the king and the Cortes, which then divided the total amount among the different jurisdictions. This system was called encabezamiento. Participating cities were free to collect their quota as they saw fit; They often did this by taxing only certain goods that were easy to monitor, such as those sold through authorized entities.

Cities could withdraw from the agreement and return to a tax farm or direct collection. Since the 1570s, the merchant class of Milan, as in other cities, had over time lost the central economic role it had acquired in the economic boom after the end of the Franco-Spanish Wars. The production of urban guilds declined in favor of processing activities that spread to the countryside and were mainly aimed at the production of semi-finished silk products. The interests of the main economic actors have therefore increasingly shifted to rural districts, in many cases aligned with those of the landed nobility and merged with them. There were also several taxes on certain major economic activities. The most important were those for silk production in Granada (renta de la seda) and taxes on migratory flocks of sheep (servicio y montazgo), which reached their peak in the late fifteenth and early sixteenth centuries. Activity 1: Classification of direct and indirect taxes: Classification of direct or indirect taxes. In the end, individuals pay almost all taxes.

Businesses and corporations use tax transfer to pass on taxes to their customers, patients, employees and shareholders. There are indeed four important components of the UK`s direct tax and social protection system, as it affects labour supply. The first is the tax-free individual allowance on earned income, below which no direct tax is paid. Couples in the UK are taxed independently and the tax allowance is also based individually. In 1996, it was £3650 a year (almost $6000) and was large enough to exempt many low-wage part-time workers, especially married women, from direct taxes. About 36% of working women who were married to working men had income below this limit. The majority of workers whose employment income is above this limit pay direct taxes on a flat-rate basis that increased from about 33% to 24% in the 15 years prior to 1996.1 The distinction between direct and indirect taxes was first discussed in detail by Adam Smith in his book Wealth of Nations, as in the following passage: Tax policy in the European Union (EU) consists of two components: direct taxation, for which the Member States remain solely responsible, and indirect taxes, which affect the free movement of goods and the free movement of services. As regards direct EU taxes, Member States have taken measures to prevent tax evasion and double taxation. Direct taxation in the EU covers the following policy areas with regard to companies: the Common Consolidated Corporate Tax Base, the common tax regime applicable to parent companies and subsidiaries of different Member States (to avoid withholding tax where the dividend is eligible for the application of the EC Parent-Subsidiary Directive[19], ] financial transaction tax, interest and royalty payments between affiliated companies and the elimination of double taxation where the payment can be applied to the EC Interest and Royalties Directive.

[20] As regards direct taxes on natural persons, the measures include the taxation of savings income, the taxation of dividends on natural persons and the removal of tax obstacles to the cross-border provision of occupational pensions. There is no consensus in the academic literature on whether direct taxes are more effective or not. Previous work based on static models favors direct taxation, while recent literature based on neoclassical growth models shows that indirect taxation is more effective. The conclusions of these debates are that the answers are mostly speculative, depending on the economic structure. [5] The last major source of indirect taxes was the monopolies of the crown, which gained prominence in the last decade of the sixteenth century and became one of the most important sources of royal revenue in the seventeenth century. These monopolies were sometimes chartered, but often operated directly by the Crown. The most important, both founded in the seventeenth century, were those on paper, which was necessary for all official actions (papel sellado) and on tobacco. Non-tax revenues are the recurrent revenues that the government derives from sources other than taxes. Description: The main revenues under this heading are interest income (received from government loans to states, railways and others) as well as dividends and profits from public sector enterprises.

Various services provided by the government – police and defense, social affairs Conversely, in rural communities, the amount due was collected mainly through direct taxes (in open spaces, that is, not surrounded by walls, the collection of taxes was obviously difficult), such as the salt tax (which moved from the tariff to direct collection); the Tasso dei Cavalli; Perticato (a property tax determined on the basis of the value of the property owned); Imbottato (a tax on agricultural products such as wine and wheat); and Testatico (a voting tax paid by rural residents for themselves and their family members). What made the tax contribution truly unbearable and patently unfair to the rural population was the frequent obligation to house troops, while cities and citizens` lands (the civilian perticato already mentioned) were exempt.19 Another belief consistent with the above story is that environmental taxes are levied to punish polluters….