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Table of Contents
Impact incidence and shifting of taxation
Impact of Taxation- Impact of taxation refers to the immediate burden of tax. The impact of a tax is the immediate result of the imposition of tax on a person who pays it in the first instance. Hence it is the primary burden of taxation.
Shifting of Taxation- Shifting of tax is a process by which the money burden of a tax is transferred one person to another.
Incidence of Taxation- The incidence of taxation refers to the final money burden of a tax on a person, who ultimately beats it. Whenever the money burden of a tax finally settles to rest of the ultimate tax payers, it is called the incidence of tax.
Example of Impact incidence and shifting of taxation
Impact shifting and incidence of a tax is explained with help of an example. Suppose govt imposes a tax on a biscuits product.
Here the biscuits producer bears the impact of tax . Now the biscuits producers tries to shifting the burden of the tax. In the figure to retailer bears the shifting of the tax. Now the tax is ultimately bears by the consumers. Hence the consumer is the incidence holder of the tax.
Distinguish between impact and incidence of taxation?
The following points show the difference between impact and incidence of taxation-
| Impact | Incidence |
| (i) It is tell by the tax payer is the point of imposition of a tax. | (i) It is tell by the tax payer at the point of settlement of the tax. |
| (ii) It refers to the initial burden of the tax. | (ii) It refers to the ultimate burden of the tax. |
| (iii) It can be shifted easily. | (iii) It can not be shifted. |
| (iv) Evasion of tax is illegal. | (iv) Incidence of tax is not illegal. |
| (v) It is tell by the person from where the tax is collected. | (v) It is tell by the person who actually bears the burden of tax. |
| (vi) Monetary payment of tax is include in it. | (vi) Direct monetary burden is included in it. |
| (vii) Impact can be on a person who can not shift it. | (vii) Burden of tax can be easily shifted on others. |
Conclusion
So friends, this was the impact incidence and shifting of taxation. Hope you get the full details about it and hope you like this article.
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