What is the difference between impact incidence and shifting of taxation?

The person who pays the tax is known as impact incidence. Shifting of taxation means shifting the burden of tax by the taxpayer to another person. An example could be a producer increasing the price of goods so that consumers end up paying more. This is called single point shifting. You can read about the Goods and Services Tax Act – Overview, Key Features and Criticism  in the given link.

Shifting of taxation has another category known as multi-point shifting. Here the burden of taxation is shifted from producer to wholesaler, who in turn shifts it to retailer. The retailer finally shifts the burden of tax to consumers.

Further readings:

  1. Double Taxation Avoidance Agreements (DTAA) – Countries Involved, Income Tax Provisions
  2. UPSC Mains General Studies Paper-III Strategy, Syllabus & Structure

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