incidence of taxation

Quick Reference

The impact of a tax on those who bear its burden, which may not be limited to those who are charged to pay it. For example, value added tax (VAT) is paid by traders, but part of the ultimate burden of it falls on the consumer of the trader's goods or services. Again, a company may pay corporation tax but if it then raises its prices or reduces its employees' wages to recoup some or all of the tax, it may be said to have shifted the incidence.

Subjects: Financial Institutions and Services.

Reference entries