State and briefly explain the factors that influence tax shifting.

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.