CA Foundation · Business Economics · Public Finance
Which of the following taxes is best described as having its incidence and impact on different persons?
Excise duty on cigarettes is paid to the government by the manufacturer but passed on to consumers through higher prices. Impact therefore falls on the producer while incidence falls on the consumer, which is the hallmark of an indirect tax.
- APersonal income tax
- BWealth tax on an individual's assets
- CCorporate income tax paid on profits by a company
- DExcise duty on cigarettes charged to the manufacturerCorrect
Explanation
With excise duty, the manufacturer pays the government (impact) but recovers it through higher prices, so consumers bear the burden (incidence). Personal income tax and wealth tax are borne by the payer. Corporate tax is generally treated as borne by the company in the standard textbook classification.
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