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Explain five attributes of a good tax system.

Explain five attributes of a good tax system.

Answers

joseph
i. Equitable / fairness - the system should ensure that there is fairness in payment of tax so that no particular section of the society is overburdened.

ii. Certainty/simplicity - the tax should be easily understood in terms of the amount and method of payment.
iii. Convenient - the system should consider the convenient time when the payers have money otherwise, they may find it difficult to pay.

iv. Economical - if the objective of levying is to raise revenue, the cost of collecting it should be low compared to the tax collected.

v. Flexible - the tax system should be able to change with the changing economic conditions otherwise it may cease to meet its objectives.

vi. Evasion - it should not be able to evade tax otherwise it may not achieve the desired objectives.

vii. Allocation of resources / incentives - the tax should not be a disincentive to investments or lead to mis-allocation of resources.

viii. Diversified - a variety of taxes should be levied to enable as many citizens as possible to contribute according to their abilities.

OR

1. Equitable
The tax system should meet the canon of equity. Every person should be taxed according to his ability, that is, the rich should pay more and the poor less and therefore taxes should be progressive in nature.
2. Certain
A good tax system should be based on the cannon of certainty. “The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor and to every other person.” The tax, which every individual is required to pay, should be certain and not arbitrary so that he is not left to the whims of the tax officials
3. Convenient
The tax system should satisfy the canon of convenience, i.e, the time and mode of payment of the tax should be so fixed that it is not, inconvenient for the taxpayer.
4. Economical
A good tax system should be economical to the government in the sense that the cost of collection of taxes should be small in proportion to the revenue from them.
5. Productive
The tax system should be such as to bring in sufficient revenue in the exchequer. In other words, it should be productive.
6. Elastic
A good tax system should be sufficiently elastic so that the tax revenue may be increased or decreased according to the requirements of the state.
7. Simple- The tax system should be simple to understand and administer.
8. Multiple Taxes
A good tax system should have multiple taxes rather than a single tax. According to Dalton, “It is best to rely on a few substantial taxes for the bulk of the tax revenue.”


9. Income-Elastic
It should be income-elastic. As national income increases, the share of taxation in national income should rise more than proportionately.
10. Least Bad Economic Effects
According to Dalton, “The best system of taxation from the economic point of view is that which has the best, or the least bad economic effects.” It should not adversely affect production through effects on ability and desire to work, save and invest.
11. Reduce Inequalities. According to Wagner, a good tax system should reduce the inequality of incomes.
12. Balanced.
The tax system should be a balanced one in which progressive, proportional, direct and indirect taxes should be properly distributed.
joseph rimiru answered the question on December 26, 2017 at 19:48

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