<P> A country or state's tax burden as a percentage of GDP is the ratio of tax collection against the national gross domestic product (GDP). This is one way of illustrating how high and broad the tax base is in any particular place . Some countries, like Denmark, have a high tax - to - GDP ratio (as high as 48%, the highest in the world). Other countries, like India, have a low ratio . Some states increase the tax - to - GDP ratio by a certain percentage in order to cover deficiencies in the state budget revenue . In states where the tax revenue has gone up significantly, the percentage of tax revenue that is applied towards state revenue and foreign debt is sometimes higher . When tax revenues grow at a slower rate than the GDP of a country, the tax - to - GDP ratio drops . Taxes paid by individuals and corporations often account for the majority of tax receipts, especially in developed countries . </P> <P> The burden from taxation is not just the quantity of tax paid (directly or indirectly), but the magnitude of the lost consumer surplus or producer surplus . The concepts are related but different . For example, imposing a $1000 per gallon of milk tax will raise no revenue (because legal milk production will stop), but this tax will cause substantial economic harm (lost consumer surplus and lost producer surplus). When examining tax incidence, it is the lost consumer and producer surplus that is important . See the tax article for more discussion . </P> <P> The theory of tax incidence has a large number of practical results, although economists dispute the magnitude and significance of these results: </P> <Ul> <Li> If the government requires employers to provide employees with health care, some of the burden will fall on the employee as the employer will pass it on in the form of lower wages . Some of the burden will be borne by employer (and ultimately the customer in form of higher prices or lower quality) since both the supply of and demand for labor are highly inelastic and have few perfect substitutes . Employers need employees largely to the extent they can substitute employees for machines, and employees need employers largely to the extent they can become self - employed entrepreneurs . An uneducated population is therefore more susceptible to bearing the burden because they are more easily replaced by machines able to do unskilled work, and because they have less knowledge of how to make money on their own . </Li> <Li> Taxes on easily substitutable goods, such as oranges and tangerines, may be borne mostly by the producer because the demand curve for easily substitutable goods is quite elastic . </Li> <Li> Similarly, taxes on a business that can easily be relocated are likely to be borne almost entirely by the residents of the taxing jurisdiction and not the owners of the business . </Li> <Li> The burden of tariffs (import taxes) on imported vehicles might fall largely on the producers of the cars because the demand curve for foreign cars might be elastic if car consumers may substitute a domestic car purchase for a foreign car purchase . </Li> <Li> If consumers drive the same number of miles regardless of gas prices, then a tax on gasoline will be paid for by consumers and not oil companies (this is assuming that the price elasticity of supply of oil is high). Who actually bears the economic burden of the tax is not affected by whether government collects the tax at the pump or directly from oil companies . </Li> </Ul>

Tax which is paid by the person on whom the tax is incident is called