Indirect tax
Definition: Indirect tax is a type of tax where the incidence and impact of taxation does not fall on the same entity. Description: In the case of indirect tax, the burden of tax can be shifted by the taxpayer to someone else. Indirect tax has the effect to raising the price of the products on which they are imposed.
What do u mean by shifting of tax?
Tax shift is a kind of economic phenomenon in which the taxpayer transfers the tax burden to the purchaser or supplier by increasing the sales price or depressing the purchase price during the process of commodity exchange. Tax shift is the redistribution of tax burden.
When is a tax imposed, it is shifted?
When a tax is imposed, it will be shifted and re-shifted; in such a manner that no one can escape from its incidence. When a comÂmodity is subject to taxation, the process of exchange shift the tax burden, extensively. This process of diffusion leads to equilibrium when the tax burden is equally distributed among all taxpayers.
Which is the most important theory of shifting tax?
The possibility of shifting of tax depends to a large extent on the elasticity of demand and supply of the object of taxation. The demand and supply theory of incidence is considered as the most important solution to the problem of shifting of tax burden.
Why does the seller try to shift the tax burden?
The seller always tries to shift the tax burden upon the shoulders of consumers. At the same-time the buyer may resist the shifting of the tax burden. Hence, the degree and character of shifting therefore depend upon the respective bargaining power of both seller and buyer.
How does elasticity of supply affect tax shifting?
Likewise, greater the elasticity of supply, the greater is the chance to shift the burden on to consumers when supply is elastic the bargaining power of the seller is greater. He can increase or decrease supply according to circumstances.
