JKSSB Written 2022
Answer & Explanation
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Correct Answer:
Option C —
Who will bear the burden of tax
In economics, the incidence of tax refers to the final resting place of a tax burden. It identifies the person or entity who actually ends up paying the tax out of their pocket, regardless of who the government technically collects it from.Key Concepts of Tax Incidence
Impact vs. Incidence: The impact is on the person who pays the tax to the government (e.g., a shopkeeper paying sales tax), but the incidence is on the person who feels the financial pinch (e.g., the consumer who pays a higher price).
Shifting: Tax incidence often involves "shifting." For example, a government may impose a tax on a manufacturer, but the manufacturer "shifts" that burden to the consumer by raising the price of the goods.
Why the other options don't fit:
A) Effect on demand & supply: While taxes do affect demand and supply, this describes the "economic distortion" or "deadweight loss," not the definition of incidence itself.
B) Escaping tax payment: This is known as Tax Avoidance (legal) or Tax Evasion (illegal).
D) Rate of tax charged: This is simply the Tax Rate or tariff schedule.
Answer verified by Quintessence Classes faculty — Karan Nagar, Srinagar.