PRINCIPLES OF TAXATION

PRINCIPLES OF TAXATION

These are guiding principles of governing the various tax systems we have today and even in the past.

According to ADAMS SMITH (1996:87), there are major principles of taxation, among these principles of taxation are the following

1. EQUALITY OF PAYMENT:- This principles of taxation state that income earned the same level and with the same responsibility should pay the same amount of money in tax. This also means that people should pay tax according to their ability of pay (PAYE) pay as you earn.

2. CERTAINTY: This principles  of taxation holds that the amount of tax to be paid by one tax payer should be made known to him or her and how it is worked out should be clearly explained to him or her.

3. CONVENIENCE: This means that tax payment should be arranged so as to be convenient to the tax payers.

4. ECONOMY:- The tax system should be arranged to make it possible to send little amount of money in tax collection. Any system, where by a proportion of the tax money is spent on its collection, is not a good tax system that is to say that the tax authorities should be efficient in their collection of taxes.

5. SIMPLICITY: The tax system or principle should be simple enough for everybody especially the payer to understand.

6. FLEXIBILITY: A good tax system must be easily changed. These tax system concerned must be capable of being easily or conveniently adjustly as occasion warrants.

7. IMPARTIALITY: In this case, there shall not be any partiality in tax assessment. This means that tax officials should not discriminate against tax payer while assessing them for tax payment.

8. PRODUCTIVITY: In tax principle the amount realized from tax should be sufficient to cover some government expenses. According to ANDY (2001:199), this is otherwise referred or known as the principle of fiscal adequacy.

In his own contribution in the subject under consideration, FALDDUMETA (1877:212-213) agrees with the above principle of equality, there are two nations of equality. These are horizontal equity (i.e.) equal treatment for equal and vertical equality, which is the poor and rich. In the authors view, the principle of equality often envisages a transfer of income from the very rich to the poor. Progressive income tax is devised to achieve such redistribution. It takes a greater proportion of income from the rich than from the poor. The principle of equality or ability to pay reflects a concern fro the poor members of the society.

9. NEUTRALITY: In the case of neutrality, a particular tax system should not interfere with the demand and supply of goods and services. This implies that the system involved does not have to be in such a way as to hinders consumers and producers from demanding and supplying various goods and services, also it should not discourage the payers from working, investing and of cause saving.