Direct tax

A tax is levy without consideration by virtue of the economic capacity shown by the taxpayer, because of certain facts, acts or legal transactions provided for in the taxable event defined by law. Taxes are one of the main sources of a country's revenue, along with administrative fees and special contributions. Taxes being the most important. According to the article 302 the of Official Bolentin of the Spanish State (2003).

Direct taxes

In direct taxes, the capacity to contribute is deduced from the personal characteristics of the taxpayer and, therefore, they are applied on the income, richness, or other manifestations of the taxpayer's wealth and, in them, it is normally the taxpayer himself who settles and pays them directly to the corresponding Tax Administration.

The main difference between direct and indirect taxation is that direct taxation is levied on the capital of our income or belongings. While indirect tax is levied on the acts of consumption that are conducted with such wealth, or the acts of transmission of the goods that are part of the patrimony. The European Union does not have its own tax system and does not levy taxes, it leaves autonomy to each member country's government. Therefore, each nation decides the amount it collects from each taxpayer and the subsequent percentage of public spending.

Direct taxes in European Union

However, the EU plays a regulatory role with its member countries, overseeing their fiscal rules in certain aspects, those related to EU policies affecting businesses and consumers.

The direct taxes of two important countries of the European Union will be developed in detail below, Spain and Poland, to better understand how they work:

• With respect to direct national taxes in Spain, the most important is personal income tax. As its name indicates, it is responsible for taxing income derived from personal income. It is applied on the economic capacity, which is why we classify it as a direct tax.

It is a tax paid by individuals who are residents in Spain or taxpayers on their income obtained during a calendar year. This levy is based on the tax principles of progressivity, generality, and economic capacity. Income Tax campaigns begin at the beginning of April and end at the end of June. Corporate income tax is the second most common tax in Spain. In this case, the tax is levied on the profits that the companies generate annually. Currently, in Spain, the tax rate is 25% and 15% for newly created entities.

• Next, an analysis of the Polish tax system will be conducted to develop the main direct taxes and how they work.

The Polish tax system is based on three pillars: the Constitution of the Republic of Poland, national tax rules and EU tax rules. VAT and excise taxes are one of the main sources of revenue for the Polish budget. The Polish tax system has developed rapidly over the last 25 years.

As for the operation of personal income tax, if income does not exceed PLN 120,000, the tax rate is 12% minus a tax deduction of PLN 3,600. If income exceeds 120 000 PLN, tax is charged at 10 800 PLN + 32% of the deductible amount above 120 000 PLN. The total amount above is PLN 10,800 excluding tax.

Taxable companies with their tax residence or board of directors in Poland must pay tax in the country on their worldwide income, otherwise they will only be taxed on income generated in the country.The corporate income tax rate is 19%.

The taxable income is the profit after deducting the cost of production of goods or services. However, some expenses are not deductible (such as some advertising and agency expenses). Property and intangible assets can be fully depreciated and deducted when put into service if their value is less than PLN 3500. There are some assets that cannot be depreciated (such as land and works of art). As for personal income tax, permanent residents, including foreigners, are taxed in Poland on their worldwide income, while non-residents are taxed only on income earned in Poland.

The fiscal year coincides with the calendar year and applications are submitted annually, with an application deadline of April 30. Taxation is progressive and distinguishes three levels and their corresponding tax rates.

In conclusion, it should be noted that the collection of taxes in countries is one of the tasks of governments, since the revenues derived from this activity will be the subsequent public expenditure. In addition, having a consolidated tax system generates a great attraction for the country, always considering the annotations and recommendations of the European Union.

References

• Borrego, A.C, & Lopes, C. and Ferreira, C. (2012)The role of tax agents in taxpayers’ tax compliance,1026–1030.
• Durra, J.M.D.,& Esteller, A.(2014)Tax professionals' view of the Spanish Tax System: Efficiency, Equity and Tax Planning,1–9.
• European Commission Directorate-General for Economic and Financial Affairs (2014)Tax expenditures in direct taxation in EU Member States,1–53.

Author: Mónica Guijarro,Gabriela Valera,Zaira Bancells