Incidence/IMpact of taxes,&

Buoy0ncy of taxation

Public finance-Topic-6

Other public finance imp. Topics.

1.Incidence of tax(aptan)

It is final money burden, on a person who

ultimately bear it.

Tax can not be shifted to other person.

2.Impct of taxation

It is immediate burden of taxes .

It is initial burden of tax.

It can be shifted easily to other person.

3.Effects of taxation.

It refers to consequences of taxes.

When tax is imposed its effect on

production,consumption,saving , investment and

growth.

4.Shifting of taxation.

After imposing tax ,money burden of tax is transfer

from one person to another.

1.Elasticity of

the demand of

commodity.

2.Elasticity of

supply of

comm.

5.Elasticity of taxation

1.Elasticity of the demand for commodity.

The more will be the elastic of demand, the more will

be the burden of tax upon seller.

Because an increase in price due to taxes will make

demand of the commodity zero.

Opposite-

when demand for the commodity is perfectly inelastic.

The entire tax burden passed on the buyer.

2.Elasticity of the supply of commodity.

The more elastic supply of the commodity, the more

will be the burden of taxes on the buyer.

Because seller has many buyers and markets to sell its

commodity..

Opposite-

Less elastic of supply ,more burden of taxes on seller..

6.Tax shifting in different markets

1.monopoly

Monopolist maximized profit at MR=MC

Monopolist set price where profit is highest.

Tax burden can not be shift either backward or forword.

2.Monopolistic competition.

Big firms can shift forward to consumer..

Small firm can not shift.

3.Oligopoly market.

Incidence of tax is more uncertain and complicated..

Taxes can be shifted forward.

If firms are small tax burden can not be shifted..

If firms are heavy, or large then burden shifted

to consumer.

7.Tax capitalization

Asset value is change due to imposition of taxes

on that asset.

It is form of backward shifting of tax.

Modern concept of incidence of tax given by-

Musgrave,and Mrs Ursula Hicks.

8.tax ratio

Tax ratio=Revenue from taxation

Total national income

9.Tax buoyancy

Tax buoyancy=% change in tax revenue

% change in tax base

Some important points.

1.Corporation tax is also called- super tax.

2.Wealth tax in India introduced on the recommendation

of prof-Kaldor..

3.Concept of symmetallism was given by-A.Marshall.

4.Wiseman-Peackok hypothesis related with- An

upward trend of public expenditure..

5.Sound tax system means – Maximum tax revenue..

6.wagner’s hypothesis- Law of increasing state activity..

7.new-classical public finance called- functional

finance..

8.The concept of functional finance given by- Lerner..

9.Theory of public finance-Musgrave.

10finance commission is a –statutory body..

11pump priming means- increase purchasing power of

people by increasing govt spending..

12.Rekhi committee is for- Indirect taxes.

13.Govt budget is classified into six accounts..

14.-goods which where social benefits are more than

individual- Merit goods..

15.Equalize the position of all individual called-

Egalitarian.

THEORIES OF INTERNATIONAL TRADE