The points I raise are: 1) Who ultimately pays the duties does not depend on who materially pays the check to the government; 2) Who ultimately pays the tax depends on the relative elasticities of demand and supply. Let us suppose that, without duties, demand and supply for Italian wine in the USA meets at $7 a bottle for 1,000 bottles a year. As explained very well by Cowen and Tabarrok, when demand is more elastic than supply (demand is more sensitive to price changes than supply), consumers pay less of the tax than sellers. On the other hand, if supply is more elastic than demand, then suppliers pay less of the tax than buyers. Such deadweight loss will be higher when the elasticity of demand or supply is higher.

Source: Forbes March 07, 2017 21:37 UTC