What are the Types of Tax Incidence?
By BYJU'S Exam Prep
Updated on: November 9th, 2023
There are two types of tax incidence namely statutory and economical. The economic incidence of tax is another name for the highest tax incidence. The economic incidence of a tax refers to the long-term impact that a particular tax has on how economic welfare is distributed in society. The fact that business executives are subject to corporate income tax serves as an example of statutory tax incidence.
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Types of Tax Incidence
A tax that is paid directly to the institution that is imposing it by an individual or an organization is known as a direct tax (generally government). A direct tax cannot be transferred to another person or organization. An individual or group must physically pay a particular tax to the government.
- The person or entity upon whom the tax is imposed is responsible for making the required tax payment.
- The Central Board of Direct Taxes is responsible for levying and collecting direct taxes and developing various direct tax policies.
In the context of Income Tax, What is the Incidence of Tax?
For various reasons, a taxpayer pays direct taxes to the government, such as real estate taxes, personal property taxes, income taxes, asset taxes, FBT, gift taxes, capital gains taxes, etc. There are numerous interpretations of the term “indirect tax.”
An indirect tax, such as a sales tax, a particular tax, value-added tax (VAT), or goods and services tax (GST), is gathered from the person who will ultimately bear the economic burden of the tax through an intermediary (such as a retail store) (such as the consumer).
- The intermediary then files a tax return and sends the tax money to the government along with the return.
- The term “indirect tax” is used in this context to distinguish it from “direct tax,” which is a tax imposed on people (whether legal or natural) and paid directly to the government.
Summary:
What are the Types of Tax Incidence?
Statutory and economic incidence are the two types of tax incidence, and another name for the economic incidence of tax is the highest incidence of taxation. The economic incidence of a tax refers to the long-term impact that a particular tax has on how economic welfare is distributed throughout society.
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