What is Tax Impact and Tax Incidence?

Answer. The phrase “impact” refers to the immediate outcome or initial imposition of the tax. The person feels a tax’s effects it is imposed on first.

The location of the tax’s ultimate or direct financial burden is referred to as its incidence. It represents the transfer of the tax burden to the primary taxpayer.

When the tax finally rests or settles on the person bearing it, incidence occurs. In actuality, it is the result of shifting.