Factors that influence tax shifting:
- Type of tax – direct tax cannot be shifted but indirect tax can.
- Objects of a tax – e.g. income tax can not be shifted.
- Price elasticity of supply and demand
- Availability of substitutes – goods without substitutes means consumer bear the tax.
- Geographical coverage of the tax – can consumers move to other areas to avoid tax.
- Rate of tax – higher tax rates means people try to shift tax.
- Profitability of business – If businesses are making losses there is the likelihood of shifting the whole
- tax to consumers.
- Government fiscal policy – price control means no tax shifting.
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