Syllabus T. Y. B. A. Paper : IV advanced economic theory with effect from academic year 2010-11 in idol

 
Incidence refers to the final resting or settling down of the tax 
burden. It describes who actually bears the tax. 
The impact of taxation is different form its incidence in the following 
ways: 
i) 
Impact refers to the initial burden of the tax, while 
incidence refers to the ultimate burden of the tax. 
ii) 
Impact is at the point of imposition, incidence occurs at 
the point of settlement. 
iii) 
The impact of a tax falls upon the person from who the 
tax is collected and incidence rests on the person who 
pays it ultimately. 
iv) 
Impact may be shifted but incidence cannot. For 
instances, incidence is the end of the shifting process. 
Sometimes, however, when no shifting is possible, as in 
the case of income tax or such other taxes, the impact 
coincides with incidence in the same person. 
 
 
 
 

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15.2.2 Incidence and Effects of Taxation 
Incidence refers to the eventual distribution of the money 
burden of tax. 
Effects of taxation refer to the economic consequence of a 
tax on production and distribution. Effects imply the real burden of 
taxation on the production and distribution aspects in the economy. 
(A) 
Dalton‟s Concept of Incidence: 
According to Dalton, the imposition of a tax leads to two 
types of burden on the people, i.e. money and real burden. 
Money burden refers to the amount of tax contribution which has 
to be made by the tax payer to the government.
Money burden may be direct or indirect. Direct money 
burden refers to the amount of tax being collected in terms of 
money i.e. amount of tax being paid by the tax payers.
Indirect money burden of tax arise when a tax payer may be 
forced to part with a larger amount than the tax amount i.e. a tax 
imposition and collection can cause additional expenses to the tax 
payers e.g. expense on conveyance, administration while paying 
the tax, etc. 
Real burden relates to the sacrifice which the imposition of a tax 
entails on the tax payers. Thus sacrifice is equal to loss of 
economic welfare to the individual as well as to the society. It may 
also be direct and indirect.