What is Tax?
The compulsory payment by individuals and companies to the state is called taxation. A government imposes taxes to raise revenue to cover the cost of administration, the maintenance of law and order, defense, education, housing, health, pensions, family allowances etc. Now, the government has started to subsidize farming, industries, etc. in all these causes, taxes are imposed to provide revenue to cover government expenditure.
Some taxes are imposed for social and economic purpose e.g. the highest rates are imposed for the purpose of reducing very large incomes. Taxation has often been increased in order to reduce purchasing power to check the demand or has been reduced to stimulate demand.
Cannon of Taxation:
Adam Smith's Cannon of Taxation: Adam Smith has laid down principles or cannon of taxation in his book "Wealth and Nations". These cannons still constitute the foundation of all discussions on the principles of taxation.
1. Cannon of Equality: It is most important cannon of taxation which embodies the principle of equity or justice. It provides the concept of the equality of sacrifice.
The amount of the tax paid is to be in portion to the respective abilities of the tax payers. It is not very unreasonable that the rich should contribute to the public expense not only in proportion to their revenue but some thing more than that proportion.
2. Cannon of Certainly: The tax paid by each individual should be certain but not arbitrary. The time of payment, the manner of payment, the quantity to pay, should all to be clear and plain to the contributor.
Adam Smith regards this canon as the most fundamental canon. It is not to be left to the sweet will of the income tax department. It causes the least disturbance in the economic arrangements of the tax-payer. Certainty is needed not only from the point of view of the tax payer but also from that of the state.
The compulsory payment by individuals and companies to the state is called taxation. A government imposes taxes to raise revenue to cover the cost of administration, the maintenance of law and order, defense, education, housing, health, pensions, family allowances etc. Now, the government has started to subsidize farming, industries, etc. in all these causes, taxes are imposed to provide revenue to cover government expenditure.
Some taxes are imposed for social and economic purpose e.g. the highest rates are imposed for the purpose of reducing very large incomes. Taxation has often been increased in order to reduce purchasing power to check the demand or has been reduced to stimulate demand.
Cannon of Taxation:
Adam Smith's Cannon of Taxation: Adam Smith has laid down principles or cannon of taxation in his book "Wealth and Nations". These cannons still constitute the foundation of all discussions on the principles of taxation.
1. Cannon of Equality: It is most important cannon of taxation which embodies the principle of equity or justice. It provides the concept of the equality of sacrifice.
The amount of the tax paid is to be in portion to the respective abilities of the tax payers. It is not very unreasonable that the rich should contribute to the public expense not only in proportion to their revenue but some thing more than that proportion.
2. Cannon of Certainly: The tax paid by each individual should be certain but not arbitrary. The time of payment, the manner of payment, the quantity to pay, should all to be clear and plain to the contributor.
Adam Smith regards this canon as the most fundamental canon. It is not to be left to the sweet will of the income tax department. It causes the least disturbance in the economic arrangements of the tax-payer. Certainty is needed not only from the point of view of the tax payer but also from that of the state.
