Characteristics Of Good Tax

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STUDENT NO: 0904510 DIRECT v INDIRECT TAXES UK tax rules are currently created by the combination of law, regulation and cases and the guidance from the Her Majesty Revenue and Customs. According to Stiglitz (1988) desirable tax system should economically efficient, administratively simple, flexible, politically accountable and fair. Tax system is seen to be economically efficient if it does not distort the economic decisions which are made by individuals. The system has to be neutral. That is the system should allow the collection of funds required by the government with the minimum impact on economic life and the allocation of resources. Secondly good tax system should be easy to access the information so every individual know what they are paying and when they are expected to pay. Good system of taxation has to be more convenient when paying. Without a strong degree of understanding, acceptance and compliance by taxpayers the governments waste a lot of unnecessary funds collecting taxes and lose revenue. A properly designed system of tax has to be flexible in a way that it changes or can be changed easily in response to economic changes. System of taxation that is desirable is meant to be politically accountable, which is a tax system which individuals know what they are paying, without this character some politicians will be concerned that truth-in government legislation would simply confuse the tax payers and leads them to vote for smaller budget than they would, which would lead to a reduction of important public services. Tax system should be equitable so it can be classified as good tax according to Joseph E. Stiglitz. Tax system that is fair should not benefit or harm some groups at the expense of others. There are two measures of fairness of a tax system and these are horizontal equity and vertical equity. A tax system that

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