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The legal incidence of ad valorem taxes matters

Author

Listed:
  • Pauwels, Wilfried

    (University of Antwerp)

  • Schroyen, Fred

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

It 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

Suggested Citation

  • Pauwels, Wilfried & Schroyen, Fred, 2023. "The legal incidence of ad valorem taxes matters," Discussion Paper Series in Economics 23/2023, Norwegian School of Economics, Department of Economics, revised 12 Mar 2024.
    • Handle: RePEc:hhs:nhheco:2023_023
    as

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    File URL: https://openaccess.nhh.no/nhh-xmlui/handle/11250/3108247
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    References listed on IDEAS

    as
    1. Slemrod, Joel, 2008. "Does It Matter Who Writes the Check to the Government? The Economics of Tax Remittance," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(2), pages 251-275, June.
    2. Salanié, Bernard, 2011. "The Economics of Taxation," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262016346, December.
    3. Christiansen,Vidar & Smith,Stephen, 2021. "Economic Principles of Commodity Taxation," Cambridge Books, Cambridge University Press, number 9781009002028, November.
    4. Pierre Picard & Eric Toulemonde, 2001. "On the Equivalence of Taxes Paid by Employers and Employees," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(4), pages 461-470, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    economic incidence; legal incidence; statutory incidence; ad valorem taxes; invariance theorem;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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