The incidence of a tax refers to the manner in which the burden of the tax is borne. A distinction can be drawn between the impact or formal incidence of the tax which means the person or commodity on which the tax was imposed, and the effective incidence of the tax, which means who actually pays the tax e.g. a tax on farmers may result in an increase in food prices by the amount of the taxes, in which case, though the formal incidence of the tax would have been on farmers, the effective incidence of the tax is on consumers.. With respect to direct taxes it is rather difficult to shift the incidence of such taxes. E.g. if I am paid Rwf10,000 per week and I had been paying Rwf500 per week income tax; if my income tax liability is increased to Rwf600 per week, it is extremely unlikely that I will be able to negotiate a wage increase of Rwf100 (assuming this increase was not itself taxed) in order that I may maintain parity in my after-tax pay. In contrast to this situation it may be possible to shift all or some of, of the incidence of an expenditure or excise tax, ‘forward’ on to customers or ‘backwards’ on to suppliers depending on the relative elasticity of supply and demand for the product on which the tax is levied. Whichever of supply or demand is the more inelastic will tend to end up bearing the greater proportion of the tax and if for example demand was perfectly inelastic then it would be possible to increase the price of the good by the full amount of the tax without there being any resultant fall-off in demand.