TYPES OF TAXATION

NOTE: An inheritance tax is a tax paid by a person who inherits money or property of a person who has
died, whereas an estate tax is a levy on the estate of a person who has died. Historically, an inheritance
tax used to be called death duty or capital transfer tax.
INCIDENCE OF TAXATION
Tax incidence: This is the analysis of how the burden of a particular tax is distributed. The
incidence of tax falls on the person or group who bears the final money burden of a tax

Statutory incidence: The burden of a tax borne by the party that sends the check to the

government.

Economic incidence: The burden of taxation measured by the change in the resources available

to any economic agent as a result of taxation.

THREE TYPES OF TAX INCIDENCE

Absolute Tax Incidence: This type of tax incidence examines the effects of a tax when there is
neither a change in other taxes nor a change in government spending. It is more concerned with the
change in the distribution of income, especially the personal income of the tax

Differential Tax Incidence: This type of tax incidence focuses on the distributional effects of
alternative taxes under the consideration of a state. It simply examines the variances in the
distributional effects when one tax is replaced with another, given that the government budget is
constant.

Balanced - budget Tax Incidence: This type of tax incidence is more concerned with the combination
of effects that may arise from taxes and government spending that are financed using the taxes. In
other words, this type of tax incidence pays more attention to the simultaneous changes in
expenditure policies of the state.

PRINCIPLES/CANONS OF TAXATION

Canon of Equality
Canon of Certainty
Canon of Convenience
Canon of Economy
Canon of Productivity
Canon of Buoyancy
Canon of Flexibility
Canon of Simplicity

THEORIES OF TAXATION
Benefit-Received Theory
Ability-to-Pay Theory
Cost of service Theory