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Cannons of Taxation

The following cannons or principles of taxation are used.

1) Cannon of Equality: According to this principle of taxation, equality and ability to pay the taxes are taken into account, while imposing taxes.  This means rich person must bear the heavy burden.  The tax is paid in proportion of the respective abilities of the tax payer.

2) Canon of certainty:
The tax payer should know exactly what, when and how he has to pay the tax. The state should also know how much, it will receive from tax.

3) Canon of convenience: The time and method of payment should be convenient to the tax payer. E.g. land revenue in India is conveniently paid after harvest of crops.

4) Canon of Economy:
This principle states that the cost of collection of taxes should be as small as possible. If large amount of the tax is paid on its collection, it will take much out of the people’s pocket, but bring very little into the state’s pocket.

5) Canon of productivity:
It is much better to have a few taxes which yield good revenue instead of many taxes yielding a little.

6) Canon of Elasticity: This cannon points out that a tax should automatically bring in more revenue as the countries income increases. In emergency period tax may be increased.

7) Canon of Simplicity: As for as possible tax system of a country should be diversified and broad based, It should cover large number of commodities and large number of persons.

8) Canon of Flexibility:
This principle states that the tax system should not be rigid.  A Flexible tax quickly adjusts to the new conditions. Lack of flexibility in a tax can cause financial troubles to a state.

Current Category » Introduction to Agriculture Economics