Taxes on harmful drugs and intoxicants are regarded as economical because they not only bring income but also discourage unproductive expenditure. Tax system today has to play a more positive role. The rich class people should pay higher taxes to the government, because without the protection of the government authorities Police, Defence, etc. Democratic governments aim at securing social justice. Equitable Tax System bears a significant role in bringing the harmony in the life style of the population of the country. According to this principle, every person should pay to the government depending upon his ability to pay. It should be fool-proof and knave-proof.
It is important that the cost of collection should be the minimum possible. A dynamic or a diversified tax structure will result in the allocation of burden of taxes among the vast population resulting in a low degree of incidence of a tax in the aggregate. In a federation the central government provides grants to state governments, usually in the performance of a specified function. For this purpose, a proper blending of direct and indirect taxes in the taxation system, is necessary. In the , income tax was reintroduced by by the.
After reading this article you will learn about: 1. Diversification in a tax structure will demand involvement of the majority of the sectors of the population. An element of tax is present in fee. Another meaning of productivity is that the tax should not discourage production. Canon of Convenience: Taxes should be levied and collected in such a manner that it provides the greatest convenience not only to the taxpayer but also to the government.
Pitt hoped that the new income tax would raise £10 million a year, but actual receipts for 1799 totalled only a little over £6 million. But a tax authority must go on maintaining relentlessly the above canons of taxation so that a near- ideal tax structure can be built-up. Certainty also implies that the state should know how much revenue it could expect and when it could get it. To make things worse, not only are taxes confusing but then tax laws have many interpretations. Tax systems in countries other than treat an entity as a corporation only if it is legally organized as a corporation. This tax was repealed and replaced by another income tax in 1862.
Whereas a fee is assessed as a payment for a special privilege. It was only in 1894 that the first peacetime income tax was passed through the. Forexample, income taxes are collected by employers on a monthly basisfrom the salaries of the workers. A committee was formed in 1851 under to investigate the matter, but failed to reach a clear recommendation. In a good tax system, the allocation of taxes among tax payers is made according to the ability to pay. The payment of fee legalizes some action. .
Countries that tax income generally use one of two systems: territorial or residential. These include , , Switzerland, and the , where provinces, cantons, or states impose separate taxes. Taxes transfer income from individuals to government. With a transparent tax system, we know who is being taxed, how much they are paying, and what is being done with the money. If in the development strategy public sector has been assigned an eminent place, then capital formation in the public sector must occur at a relatively higher rate. A tax is a leakage from the circular flow of income into the public sector.
Or like in New Hampshire, homeowners end up paying more on their property tax bills compared with those in neighboring states. In view of this, canon of equality and canon of ability are the two sides of the same coin. Canon of Simplicity: Every tax must be simple and intelligible to the people so that the taxpayer is able to calculate it without taking the help of tax consultants. Bankrate is compensated in exchange for featured placement of sponsored products and services, or your clicking on links posted on this website. Policy-makers lower the tax rate for individuals earning income below the poverty threshold. It implies that in absolute terms the richer should pay more taxes, because without the protection of the state, they could not have earned and enjoyed that extra income. However, anything can act as money as long as it serves its three main functions.
These taxes place an unfair burden on the poor, according to research from the Institute on Taxation and Economic Policy. The main objective of a good taxation system should be to attain certain social objectives such as redistribution of wealth and income, to reduce inequalities, etc. To make the tax system sufficiently productive it should be broad-based and both direct and indirect taxes find place in it. From equity point of view, the Indian tax system has predominance of indirect taxes that reflects the inequitable nature of this system. There is no point in introducing a taxthat costs more to collect than it generates in revenue. This implies that the revenue yield from any tax must be a sizable one.