Concept explainers
Briefly state Adam Smith’s four requirements for a good tax system.
State precisely four requirements of a good tax system as per AS.
Explanation of Solution
The Tax: As defined by IRS the tax is “an enforced contribution, exacted pursuant to legislative authority in the exercise of the taxing power, and imposed and collected for the purpose of raising revenue to be used for public or governmental purposes. Taxes are not payments for some special privilege granted or service rendered and are, therefore, distinguishable from various other charges imposed for particular purposes under particular powers or functions of government.”
The four requirements of a good tax system as defined by AS are as follows;
- 1. Equality: Tax should be collected based on the ability to pay by the taxpayer.
- 2. Certainty: The taxpayer must be certain to compute the amount of tax to be paid and the mode of payment.
- 3. Convenience: The tax collection should be made convenient to the taxpayer, by taxing at the time income is earned that is subject to tax.
- 4. Economy: The cost of tax compliance and its administration should be commensurate with the tax revenue collected.
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Chapter 1 Solutions
Concepts in Federal Taxation 2019 (with Intuit ProConnect Tax Online 2017 and RIA Checkpoint 1 term (6 months) Printed Access Card)
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