Principles of a good tax system west virginia senate. The state cannot raise sufficient revenue and, at the same time, please the tax payers. It is not necessary that each single tax should satisfy all the. Aas lewis distinguished professor of business emeritus senior economist center for business and economic research marshall university west virginia legislative joint select committee on tax reform may 4, 2015. Principles of a good tax include vertical equity fair. Some of the most important principles or characteristics of a good tax system are as follows. A tax system which follows the principles of simplicity, neutrality, stability and flexibility, will minimise administration and compliance costs, maximise taxtake and boost investment and growth. Any tax system imposing selective commodity taxation must have procedures for assign ing different goods to tax rate categories. A good tax system should consist of taxes which conform to the canons of taxation discussed above. In a good tax system, the allocation of taxes among tax payers is made according to the ability. The burden of tax in a good tax system should be the minimum and just. Aicpa principles of good tax policy oecd tax principles u. The tax system should be simple, plain and intelligible to the common man.
Simply put, taxation is the act of imposing a compulsory. Therefore, its important to view tax proposals first through the lens of what makes a. Some recommendations are fundamental in nature, calling for sweeping overhaul of the system and greatly changing our reliance on certain types of taxation. Principles of a good tax system west virginia legislature. In every country major part of the revenue is raised through taxation. Although opinions about what makes a good tax system will vary, there is general consensus that these five basic conditions should be maximized to the greatest extent possible. What are characteristics of good tax system answers. Guiding principles of good tax policy journal of accountancy. If based on income should be paid at the time the income is. Good tax system of a country must be so devised as to leave no scope for.
Adam smiths cannons, wealth of nations 1776 a good tax system is designed on the basis of an appropriate set. It should be truly a system and not a mere collection of isolated taxes, every tax should fit in properly in the system as a whole so that it is a part of a connected and integrated system. A good tax system is designed on the basis of an appropriate set of rules the system should strike a balance between the interests of the tax payer and the tax authorities. Taxation meaning, types, characteristics and principles of a good tax system. Important characteristics of a good tax system taxation. Some of these changes are minor changing a rate or adding a deduction while others may involve major substantive changes changing from an income tax to. Fairness, or equity, means that everybody should pay a fair share of taxes. For, a tax system to be a good one just cannot have all good taxes but none bad at all.
Tax policy concept statement 1 guiding principles of good. Other recommendations are more targeted and revolve around tinkering or tweaking a specific tax. A good tax system should meet five basic conditions. While tax is often unpopular, economists set criteria for what makes a good and fair tax. Characteristics of an effective tax system oklahoma. In any country the system of taxes and the laws governing them should be simple. A good tax system is one which has predominantly good taxes and which fulfils most of the canons of taxation and yields sufficient revenue yet. A characteristics approach to optimal taxation and.
It is not necessary that each single tax should satisfy all the canons of taxation. Another important characteristic of a good tax system is that it should be a harmonious whole. Characteristics of an effective tax system oklahoma policy institute. A guide to good tax policy in every legislative session there is no shortage of ideas on how to improve our state and local tax system. Taxation as an instrument for improving income distribution 6. A good tax system of a country should be such as to provide adequate elasticity in. As far as the underdeveloped countries are concerned, this is a very important characteristic of good tax system. To improve vertical equity, there needs to be some proportionality to the tax system. From this point of view, there is much scope for taxevasion in indian tax system. The fundamental purpose of any tax system is to raise revenue for government. Taxation meaning, types, characteristics and principles. There are different ways for the government to raise tax revenue. Characteristics of a good tax system economics discussion. Taxation should be used to finance public services.
Government accountability office gao criteria for a good tax system neutrality business decisions should be motivated by economic rather than tax considerations. Adequacy means that taxes must provide enough revenue to meet the basic needs of society. For this purpose, there should be proper blending of all sorts of commodity and personal taxes. To judge the merits of a tax system, it must be looked at as a whole. Principles for a modern and efficient tax system for an. Six principles or characteristics of a good tax system. This will reduce the scope for tax evasion to the minimum. This includes fairness, easy to collect, nondistortionary and increases social welfare. As a noted philosopher edmund burke once remarked, it is difficult to tax and to. Productivity of a good tax system may be interpreted in two ways 3 elasticity. In economics, taxation is defined as the means through which government finances its expenditure by imposing financial charge or other levy on citizens and corporate entities. Joint committee on taxation jct analysis criteria u.