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Canons of taxation

 Adam Smith laid down four principles to guide the taxing authority. The principles of canons of taxation enunciated by Adam Smith were so important that they have become classic. They are: (1) Canon of equality: The subjects of every state,” Smith asserted, ought to contribute towards the support of the Government as nearly as possible in proportion to their respective abilities, that is, in proportion to the revenue which they respectively enjoy under the protection of the State. Equality here does not mean that all tax-payers should pay an equal amount. Equality here means quality or justice. It means that the broadest shoulders must bear the heaviest burden. It lays the moral foundation of the tax system. (2) Canon of Certainty: Adam Smith further said, the tax which each individual has to pay ought to be certain and not arbitrary. The individual should know exactly what, when and how he is to pay a tax; otherwise, it will cause unnecessary suffering. Similarly, the State shou...
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Taxes

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 A tax (from the Latin taxo ) is a compulsory financial charge or some other type of levy imposed upon a taxpayer (an individual or legal entity) by a governmental organization in order to fund various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law. Kinds of taxes: Taxes maybe 1) Proportional 2) Progressive 3) Regressive 4) Digressive A proportional tax: is one that takes out of the pockets of every person exactly the same percentage of income. Such a tax is very simple and does not change the nature of the distribution of wealth in the country. For instance, a tax on all incomes, big or small, at a flat rate of says 5%. But obviously poorer people with  smaller incomes are hit harder in this system. Consequently, in modern taxation, proportional taxes have been given up in favor of progressive taxes. A progressive tax: This tax tries to distribute the sacrifice in a more just manner. The higher incomes are changed...
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