PRINCIPLES OF TAXATION.

Source

Taxation is an obligatory payment made by the member of the society to their Government without waiting to receive the corresponding benefits. In other words, a tax is a mandatory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund various public expenditures. The basic principles used to guide tax policy are:
1 The principles is equality (equity). All the citizens of nations are human therefore they are equal and required to pay tax equally in order to enhance their total welfare to the maximum point. And because member of the society pay equal tax doesn't mean they will equal benefits.
Horizontal equity: minimum point every individual must make minimum contribution.

Vertical equity: it takes care of differential contribution individuals contributes differential because the have different sources and amount of money. Some individuals' carry out more responsibility than the others. Capital allowance is given to investors because of their sacrifice to invest.

2 Principle of neutrality. It is expected that tax being imposed should have a certain limit. The tax imposed should not incapacitate the tax payers. It could affect their cash for investment and production. If the tax is so high, it could reduce the saving and work efforts of members of the society. One important element of neutrality is, some taxes are shiftable. It means the burden a tax layers carries can be shifted to another person who will pay for the tax sometimes in full and sometime in a particular or given percentage. The person who carries the burden now will pay the larger part if that tax.

Note:
Income tax: after all allowance have been paid, the remainder is paid as tax.

Sales/consumption tax: is paid on the quantity IG goods or service you're consuming. The vat charged as tax can be shifted from the seller to the consumer.

3 Principle of certainty. It takes into consideration of time and amount of tax that has to be certain. The tax collector must be clear about the time amount of tax to bad. If it is not clear, some tax officers could dup the tax payer.

4 Principles of convenience. Some taxes are accessed in as given year or on a monthly payment. There should be a convenient(mode) of ta payment.

5 Principle of economy. The process of tax payment should not involve any significant cost. There should be no difficulties in paying tax. There should be a fair spread of taxation.

6 Principle of tax productivity. The imposed taxes on items should generate adequate revenue.

7 Principle of buoyancy. It has a tendency of increasing with intended base of tax.

8 Principle of legibility. If there is need to generate additional revenue, tax policy should be flexible in the rates. It should be flexible to manipulate.

9 Principles of simplicity. It shouldn't be complicated.

10 Tax should be made to be fairly diverse.

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