In some cases, the payer of a tax can shift the economic incidence of the tax to a third party.

Question

Quizplus · Accepted Answer

The economic incidence of a tax refers to who ultimately bears the burden of the tax in terms of reduced income or higher prices. If the payer of the tax can pass on the cost of the tax to a third party, such as a customer or supplier, then the economic incidence of the tax has been shifted to that party. This is known as tax shifting.

In Some Cases, the Payer of a Tax Can Shift