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- Title
The legal incidence of ad valorem taxes matters.
- Authors
Pauwels, Wilfried; Schroyen, Fred
- Abstract
It is well known that, for a specific tax, its economic incidence does not depend on which side of the market has the legal obligation to pay the tax. In this paper, we show that, for an ad valorem tax, this legal incidence does matter for the economic incidence. In particular, when a government imposes an ad valorem tax rate on the sale of a commodity, the resulting reduction in the market equilibrium level of sales will be larger when sellers are obliged to pay the tax than when buyers are obliged to pay the tax.
- Subjects
TAXATION; MARKET equilibrium; TAX rates; OBEDIENCE (Law)
- Publication
Journal of Economics, 2024, Vol 142, Issue 2, p199
- ISSN
0931-8658
- Publication type
Article
- DOI
10.1007/s00712-024-00863-0