Final answer:
The administrative burden in taxation encompasses the difficulties such as understanding tax laws and processing tax payments, it affects consumer behavior and the overall economy, with the tax incidence falling more on consumers or sellers depending on the elasticity of demand or supply.
Step-by-step explanation:
The administrative burden in taxation refers to the complexities and difficulties experienced by taxpayers due to the tax system's requirements, such as understanding tax laws, completing tax returns, and dealing with the tax collection agency. For instance, if the Internal Revenue Service (IRS) is slow in sending a tax refund or seems unable to answer questions, taxpayers have no alternative but to deal with the delay and uncertainty because they cannot choose a different organization for tax payment and processing. In economics, taxes influence the economy by affecting consumer behavior, resource allocation, growth, and productivity. Taxes are a financial charge imparted on individuals or legal entities with the expectation of funding government spending and various public expenditures.
When it comes to the incidence of a tax (who ultimately bears the cost), if the demand for a product is more inelastic than the supply, consumers will bear most of the tax burden, as they will continue purchasing the product despite the higher price due to taxes. Conversely, if the supply is more inelastic than demand, sellers will shoulder more of the burden, as they have fewer opportunities to pass the tax onto consumers.
The administrative burden of taxation can be viewed as a negative aspect, creating additional costs and reducing efficiency for both individuals and businesses. It can lead to lower levels of savings, investments, and work incentives, subsequently influencing the overall performance of the economy.