Which of the following is not a direct tax?

Step 1: Analyze the question The question asks which option is NOT a direct tax, so we are looking for an indirect tax.

Step 2: The concept

• Direct tax: Levied directly on a person's or organisation's income or wealth. The person who pays it bears the burden and cannot shift it to someone else. Examples: personal income tax, company income tax, capital gains tax, capital transfer tax, and inheritance tax.
• Indirect tax: Levied on goods and services (spending). The burden can be shifted to the final consumer. Examples: VAT, excise duties, import duties, sales tax, and purchase tax.

Step 3: Check each option

• A. Capital gains tax: Charged on profits made from selling assets such as land or shares. It is paid directly by the person who gains, so it is direct.
• B. Purchase tax: Charged on goods when they are bought, and included in the price the consumer pays. The seller collects it and the buyer bears it, so it is indirect.
• C. Personal income tax: Deducted from a person's earnings (PAYE). It is direct.
• D. Capital tax: Levied on a person's or firm's wealth or capital assets. It is direct.

Step 4: Answer The only indirect tax is purchase tax, so the answer is B.

Tip: Ask yourself, "Can the taxpayer pass this on to someone else?" If the tax attaches to income or wealth (income, gains, capital, property), it is direct. If it attaches to buying or selling goods (purchase, sales, VAT, excise, customs duties), it is indirect.