What is the Difference between Impact Incidence and Shifting of Taxation?

By BYJU'S Exam Prep

Updated on: November 9th, 2023

The difference between Impact Incidence and Shifting of Taxation is that Impact incidence refers to the person who pays the tax, whereas moving the tax burden by the payer to another individual is called the shifting of taxation. There are two types of shifting of taxation one is a single point, and the other is multi-point. Taxation is primarily used to generate revenue for government expenditures, but it can also be used for other purposes.

Difference Between Impact Incidence and Shifting of Taxation

Impact refers to the initial tax burden, while incidence refers to the ultimate burden of the tax. Shifting of Taxation occurs when a taxpayer transfers the tax burden to the purchaser or supplier.

Check out Impact Incidence vs Shifting of Taxation below.

Impact Incidence

The first resting point of a tax is its impact. For instance, the manufacturer is responsible for paying any excise duty levied on the manufacture of a good, even though the tax cost is ultimately passed along to the final consumer and included in the product’s price.

In this case, the manufacturer is affected while the consumer is affected by the incident.

Tax Shifting

Shifting the burden (payment) of a tax from one person to another is known as tax shifting.

For instance, in the GST (Goods and Services Tax) scenario, the final recipient of the tax is the consumer rather than the producer. The manufacturer transferred the cost of the taxes to the final consumer.

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