Shifting an Incidence of Taxation Law and Legal Definition

Shifting an Incidence of Taxation determines the economic entity that actually ends up paying a particular tax. In the case of indirect taxation, tax is normally intended to fall upon consumption and be borne by consumers, so that entrepreneur who pays the tax on his supplies of goods and services in general passes on the tax, or "shifts" it "forward" to the consumer by adjusting his prices appropriately. Such taxes are said to be shifted "backward" in the case that entrepreneurs are forced to absorb some of new or increased tax.