11 ÓCentre for Economics and Business Research 3. Extent to which duty changes are passed through 3.1. Introduction This section examines the extent to which a rise in duty might be passed through to consumers. It takes account of the CMA (Competition and Markets Authority) examination of the impact of the cut in fuel duty announced in the March 2022 budget on the price of fuel8 and on data on the extent to which the rise in the underlying price of oil has been passed through. 3.2. The theory The standard theoretical relationship between a tax and its incidence is shown In Figure 19. It shows that the burden of the tax in theory should be shared between the consumer and the producer with the precise incidence determined by the elasticities of supply and demand. Figure 1 Theoretical incidence of a $3 tax imposed on oil from a standard economics textbook 8 https://www.gov.uk/government/publications/road-fuel-review/road-fuel-review 9 https://pressbooks.bccampus.ca/uvicecon103/chapter/4-6-taxes/
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