What are the types of tax incidence?

By Ritesh|Updated : September 6th, 2022

There are two types of tax incidence: statutory and economical. The highest tax incidence is another name for the economic incidence of tax.

  • The eventual burden that a particular tax has on how economic welfare is distributed in society is known as the economic incidence of a tax.
  • An illustration of statutory tax incidence is that company executives are subject to corporate income tax.
  • It denotes that a specific tax must be physically paid to the government by a person or group.

Different 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.
  • 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.
  • For various reasons, a taxpayer pays a direct tax to the government, such as real estate taxes, personal property taxes, income taxes, asset taxes, FBT, gift taxes, capital gains taxes, etc.
  • The phrase "indirect tax" has several different meanings.
  • An indirect tax is collected from the person who will ultimately bear the economic burden of the tax through an intermediary (such as a retail store), such as sales tax, a specific tax, value-added tax (VAT), or goods and services tax (GST) (such as the consumer).
  • Later, the intermediary files a tax return and sends the tax money together with the return to the government.
  • In this context, the word "indirect tax" is used to contrast with "direct tax," which is a tax that is levied against individuals (whether legal or natural) and is 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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