Multiple choice

Which of the following statements is not true about the incidence of tax?

  1. It refers to the initial burden of tax.

  2. It is upon the person who actually bears the burden of tax

  3. It cannot be shifted.

  4. None of these
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A Correct answer
Explanation

This statement is not true about incidence of tax. The incidence of tax refers to the ultimate burden of tax, not to the initial burden. For example, in sales tax, the impact of tax, i.e. the initial burden is on the seller who pays the sales tax to the government, but its incidence, i.e. the ultimate burden actually falls on the consumer or purchaser as sales tax is included in the price. Hence, the incidence of tax refers to the ultimate burden, not the initial burden.

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