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The legal incidence of ad valorem taxes matters

Name: The legal incidence of ad valorem taxes matters
Keywords: ad valorem taxes, Legal incidence, Invariance theorem, Economic incidence, Statutory incidence

descriptionPublicationkeyboard_double_arrow_right Article , Research 01 Jan 2023 Norway Publisher:Springer Science and Business Media LLCJournal:Journal of Economics, volume 142, pages 199-211 (issn: 0931-8658, eissn: 1617-7134,

Authors: Wilfried Pauwels; Fred Schroyen;

doi: 10.1007/s00712-024-00863-0 , 10.2139/ssrn.4669498

handle: 11250/3108247

The legal incidence of ad valorem taxes matters

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Abstract

AbstractIt 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.

Country

Norway

Related Organizations

Norwegian School of Economics
Norway
University of Antwerp
Belgium
NHH Norwegian School of Economics
Norway

Keywords

ad valorem taxes, Legal incidence, Invariance theorem, Economic incidence, Statutory incidence

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RCN| Norwegian Fiscal Studies - A Centre for Research in Public Finance