Canon of Equality This means equality of sacrifice It implies equity and justice Here equality implies that every tax payer should pay the same rate of taxation but not same amount It is a sort of proportional tax ID: 1028237
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1. CANONS OF TAXATIONAdam Smith, the father of economics, made significant contributions to the economics theory and particularly in the field of taxation. His statements are considered as Canons of taxation.Canon of Equality: This means equality of sacrifice. It implies equity and justice. Here equality implies that every tax payer should pay the same rate of taxation but not same amount. It is a sort of proportional tax.Canons of Sacrifice: The principle also means the equality of sacrifice. The amount of tax paid should be in proportion to the respective abilities of the tax payer. Here ability implies income levels. This clearly points to progressive taxation.
2. Canon of Certainty: Certainty refers to the idea that taxes should be clear and transparent. That means everybody should know or quickly find out how much they have to pay, when they have to pay, and how they have to pay their taxes. This is important because it allows taxpayers to consider their taxes when drawing up a budget. In addition to that, it has been shown that transparency increases public acceptance.Canon of Convenience: Convenience means that both the timing as well as the method of payment are convenient for the taxpayers. That means the system should be designed in a way that allows people to quickly file and pay their taxes when they’re due. In that sense, the canon of convenience is sometimes also considered an extension of the canon of certainty that focuses more on the administrative process.
3. Canon of Economy: In this context, economy refers to the idea that the cost of collecting taxes should be minimized. That means the government has to ensure that the collection of taxes only requires the least possible expenditure. The reasoning behind this is that most of the money collected through taxes should be used to fund projects that, in turn, benefit the taxpayers.