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Direct taxes

Definition

10.1. Direct taxes are compulsory unrequited transfers made by households to government, usually out of income received during the period. The government makes no (direct) return to the individual taxpayer although the revenue raised through taxation is used to provide goods and services to the community as a whole, or to other individuals or groups.

10.2. Direct taxes consist mainly of taxes levied on the incomes of households (and unincorporated enterprises owned by households). They are net of rebates but may include provisional taxes paid for future income.

Classification

10.3. Direct taxes:

• income tax (including Medicare levy and associated fines/penalties),

• capital gains tax (including associated fines/penalties).

Definition

10.4. Compulsory fees are those which are associated with regulatory functions of government or the granting of a permit or privilege. Examples are motor vehicle registration fees, drivers' or pilots' licence fees, fishing licences, etc. Where such fees are associated with production of entrepreneurial or property income, they are treated as indirect taxes (which constitute part of operating costs).

10.5. Fines are civil criminal penalties imposed on law breakers. Conceptually these include fines and penalties imposed by taxation authorities but because of the practical difficulties involved in separately identifying these payments they are treated as part of direct taxes.

Classification

10.6. Compulsory fees and fines are classified as:

• stamp duties

• licence fees

• civil and criminal fines (excluding tax related fines/penalties).