Q. Which among the following is the correct definition of Real Burden of Tax ?

A
The reduction in the disposable income to the tax payers
B
Amount of tax being paid by the taxpayers to the authorities
C
Additional expenses incurred by the taxpayers, in addition to the amount paid to the authorities
D
The Loss of the welfare to the taxpayers and the community as a whole
Solution:

Real burden of a tax may also be direct or indirect. Direct real burden of a tax will be the sacrifice of the welfare which the tax itself imposes upon the taxpayers, but not as net of the benefits, if any. Indirect real burden is the indirect loss of welfare which results from (a) interference with consumer choice, (b) changes in factor supply and hence total output, and (c) changes in employment through changes in aggregate demand.

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