Characteristics of a Good Tax System | Cannon of Taxation

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Hi friends, in today’s article we are going to know about the characteristics of a good tax system or Cannon of Taxation. So let’s discuss in details.

Characteristics of a Good tax System

The important characteristics of a good tax system or Cannon of Taxation are discussed below –

(i) Cannon of equity – According to this equity cannon taxation should be imposed on an individual should be in accordance with his ability to pay. Thus, larger amount of tax for the rich than the poor, since former has greater ability to pay than the later.

(ii) Cannon of certainty – A tax should not cause hardship to the tax payer. Therefore this cannon requires that tax payer should be certain about the amount, time and manner of payment of the tax.

(iii) Cannon of convenience – This maximum wants to ensure that the time and method of payment of the tax become most convenient to the tax payer.

(iv) Cannon of Economy – This principle indicates that a good tax system will require the least possible expenditure on collection of taxes.

(v) Cannon of productivity – This cannon indicate that it is better to impose a few productive taxes rather than to go for a large number of unproductive taxes.

(vi) Cannon of simplicity – According to this cannon, the system of taxes and laws governing them should be as simple as possible so that tax payers find no problem in the process of paying taxes.

(vii) Cannon of elasticity – In contrast to stagnation the yield from taxation should grow along with increase in population and development of economy.

(viii) Cannon of flexibility – A good tax system should have the quality of flexibility in the sense that it’s able to quality adjust to the new solution of economy.

(ix) Cannon of diversity – This characteristic requires that the tax system to be broad based. The system should be diversified with a large and variety of taxes so that it can touch all sectors of people in the society.

(x) Equal treatment of equals – It means that people of equal economic position should pay equal amount of tax.

(xi) Unequal treatment of Unequal – It means those people who are better off should bear larger tax burden than those who are worse off.

So, good tax system have above the mentioned characteristic.


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