Measuring the Impact of Indirect Tax Using a Practical and Direct Way

Amir Bakir

Abstract


This paper aims at deriving a practical and direct measure of the impact of indirect tax using the consumer economic theory and the law of demand. It highlights the relevant theory and applications as revealed in the previous papers and studies. Later on, the paper derives a practical and direct measure of excess burden using the concept of compensating and equivalent variations and demand parameters. The underlying calculations are then clarified through an example that assumes an LES utility function.


Keywords


Indirect Tax, Excess Burden, Deadweight Loss, Compensating and Equivalent Variation

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