Explain five types of direct taxes that the government may use to collect revenue from individuals and companies. (10 marks)

Types of direct taxes that the government may use to collect revenue from individuals and companies

​Types of direct taxes that the government may use to collect revenue from individuals and companies include:

• Personal Income Tax (P.A.Y.E.).
  This is tax charged on an individual’s income which may be from salaries, wages and profits made from businesses. This tax is usually progressive in nature.
• Corporation Tax.
  This tax is usually charged on the profits made by companies and other incorporated business. It is a fixed percentage of the profits.
• Capital Transfer Tax.
  This tax is charged when there is change of ownership of capital investment from one person to another.
• Stamp duty.
  This tax is charged on the transfer of land or securities from one person to another.
• Capital gains tax.
  This tax is charged when an asset is sold at a price that is higher than its book value.
• Estate (death) duty.
  This tax is levied when property is transferred to an inheritor/ heir after the death of the original owner.
• Wealth tax.
  This tax is levied on personal wealth that goes beyond a certain limit. This wealth may include realizableassets like land, houses, accumulated profits and even savings.
• Withholding tax.
  This tax is levied on savings like pension dividends and any moneys held by individuals.

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