Not all taxes are created equal. They vary in obvious ways, such as who has to send money to the government. They vary in subtle ways, too – such as who actually pays the tax.

For instance, the government may ask the buyers of computers to pay a ￡50 computer purchase tax; or they may ask the sellers of computers to pay a ￡50 computer sales tax. It does not take much economics to show that it makes no difference to the taxman who writes the cheque: the after-tax price that buyers and sellers pay will be the same either way.

The same economics will also show who ends up absorbing more of the tax: it is whoever is less price-sensitive. If manufacturers and retailers are willing to expand dramatically or contract production in response to the price the market will bear, it will be computer buyers who pay most of the tax. If potential buyers will be driven away by modest price increases, it will be computer sellers who swallow the tax instead. If both buyers and sellers are price-sensitive, the tax will simply shut down the market.