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What are the characteristics of Good TAX System?

Principles or characteristics of a good TAX System

Characteristics of good tax system

1. Canon of ability or equality

A good tax system should possess the quality of equality. All citizens should borne government expenditure according to their ability. This does not mean that the rich and poor alike should pay taxes equally or at the same rate. it simply means equality of sacrifice.

2. Canon of certainty

A good tax system should have certainty about the yield from taxes.

3. Canon of convenience

According to Adam Smith while imposing tax the time and method of cash payments should be convenienat to the taxpayers. A convenient tax system encourages the players to pay tax in time. An inconvenient tax is unpopular.

4. Canon of the economy

According to Adam Smith a good text should possess Canon of the economy. This means that the amount of text should be minimum and its cost of collection should be lower than the revenue raised from it. It also implies that the text should not have a wise effect of production.

5. Canon of productivity

The Canon of productivity was formulated by bistable. According to this Canon, the government should raise revenue sufficient enough to meet its expenditures. For this only one touch yielding more revenue should be imposed instead of imposing many yielding low-income.

6. Canon of elasticity

The test system should be elastic. Government expenditure increases every year. Hence, tax should be easier to increase revenue in case of need. An income tax is a good example of Elastic tax. The government can increase revenue by increasing the Limit of income tax.

7. Canon of flexibility

Flexibility that there should be no rigidity in the tax system. Flexibility is needed for electricity. In brief, the tax system of a country should be liable to change promptly in case of need.

8. Canon of simplicity

The test system should be easier to comprehend even by the common people. The people do not hesitate to pay a text only when they can easily understand the objective, method of payment, time of payment, and effect of tax.

9. Canon of diversity

The government should arise from people of all classes of four public welfare by increasing the variety of taxes. Diversity increases the cost of tax, caution must be taken on it.

10. Canon of uniformity

There should be uniformity in the tax system. The method of imposing all taxes should be the same. Likewise, there should be uniformity in tax rates.