Direct Taxes

Direct Taxes and the GATT Policy Negotiations

In relation to the GATT Policy Negotiations, Christopher Mark (1993) provided the following explanation and/or definition of Direct Taxes: Taxes on all forms of income including wages, profits, interest, rents, and royalties, or on the ownership of real property. Under GATT Article 6 and the Subsidies Code, the rebate of direct taxes on exported products –but not of indirect taxes –can be considered an export subsidy and be penalized by a countervailing duty. The direct tax/indirect tax distinction in GATT creates a disadvantage for US firms, since other countries tend to rely on indirect taxes while the United States relies more on direct taxes for revenue purposes.