Page "Tax" Paragraph 85

Law establishes from whom a tax is collected.

In many countries, taxes are imposed on business ( such as corporate taxes or portions of payroll taxes ).

However, who ultimately pays the tax ( the tax " burden ") is determined by the marketplace as taxes become embedded into production costs.

Economic theory suggests that the economic effect of tax does not necessarily fall at the point where it is legally levied.

For instance, a tax on employment paid by employers will impact on the employee, at least in the long run.

The greatest share of the tax burden tends to fall on the most inelastic factor involved — the part of the transaction which is affected least by a change in price.

So, for instance, a tax on wages in a town will ( at least in the long run ) affect property-owners in that area.