GENERAL

PRINCIPLES OF
TAXATION
WHAT IS TAXATION?
Taxation is the sovereign's inherent
power, exerted through the legislative, to
impose obligations on subjects and
objects within its jurisdiction in order to
raise income for the government's
legitimate purposes. It is also defined as
the act of levying a tax, i.e. the method or
means by which the sovereign, through
its legislative body, raises revenue to
cover government expenses. It is a means
of allocating the expense of government
among those who are entitled to profit
from it in some way and must
consequently incur its costs.
GENERAL PRINCIPLES
OF TAXATION

1.
HORIZONTAL
2. 3.
THE ABILITY-TO- THE BENEFIT
4.
ECONOMIC
EQUITY PAY PRINCIPLE PRINCIPLE EFFICIENCY
GENERAL PRINCIPLES
OF TAXATION

5.
EASE OF
6.
CLARITY
7.
STABILITY
8.
COST-
ADMINITRATION EFFECTIVENESS
AND
COMPLIANCE
GENERAL PRINCIPLES
OF TAXATION

9.
CONVENIENCE
HORIZONTAL
EQUITY
The notion of horizontal equity suggests
that those who are in the same or similar
situations (for tax purposes) will face the
same tax burden.
THE ABILITY-TO-
PAY PRINCIPLE
According to the ability-to-pay principle,
the overall tax burden should be
allocated among individuals based on
their ability to bear it, taking into
consideration all relevant personal
characteristics. Personal levies are the
most appropriate taxes in this case
(income, net worth, consumption, and
inheritance taxes).
THE BENEFIT
PRINCIPLE
According to the benefit principle, taxes
help determine what activities the
government will undertake and who will
pay for them, similar to how prices in
private transactions help determine what
activities the government will undertake
and who will pay for them. If this theory
were to be applied, public-sector
resource allocation would be directly
responsive to consumer desires.
ECONOMIC
EFFICIENCY
The essence of a market economy
necessitates the proper operation of a tax
system. Despite several examples to the
contrary, economists usually assume that
markets perform admirably in making
economic decisions regarding
consumption, production, and finance.
As a result, they believe that tax policy
should generally avoid interfering with
the allocation of economic resources by
the market.
EASE OF ADMIRATION
AND COMPLIANCE
When addressing broad tax principles, it
is important to remember that taxes
must be administered by a responsible
authority. Administrative problems are
especially essential in poor nations,
where illiteracy, a lack of commercial
markets, a lack of accounting records,
and insufficient administrative resources
can make compliance and administration
difficult.
CLARITY
Tax laws and regulations must be
understandable to both the taxpayer and
the tax administrator; they must be as
basic as possible (given the other
purposes of tax policy), as well as plain
and certain.
STABILITY
Tax rules should be modified
infrequently, and when they are, they
should be done as part of a
comprehensive and systematic tax
reform that includes enough provisions
for a fair and orderly transition.
COST-
EFFECTIVENESS
The costs of assessing, collecting, and
regulating taxes should be kept to a
minimum in order to achieve other taxing
aims. In rich countries, this idea is
secondary, but not in developing
countries or those transitioning from
socialism, where resources for
compliance and administration are few.
CONVENIENCE
Tax payment should be as painless as
possible for taxpayers, subject to the
limits of higher-ranking tax principles.
Governments frequently allow taxpayers
to pay high tax burdens in installments
and establish long deadlines for filing
returns.
ECONOMIC GOALS
The basic purpose of a national tax system is to
raise income to fund all levels of government
expenditures. Because government
expenditures tend to expand at least as quickly
as the national product, taxes, as the primary
source of government revenue, should grow in
lockstep.
THANK YOU