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Introduction Taxation is a method for governments to fund their expenditures by levying fees on citizens and businesses. It is the government's most important source of revenue, which is then used for public welfare. A good tax system is based on a set of principles (laws) that strike a balance between the interests of the taxpayer and the interests of the tax authorities.
Adam Smith has developed four Canons of taxation. The Canon of Equity is a notion aimed at ensuring people's economic and social justice. As a result, everyone should pay tax to the government based on his or her ability to pay. As a result, taxes should be proportional to revenue. The Canon of Certainty states that the amount of tax to be paid should be known in advance. The taxpayer should be aware of the amount of tax due and when it is due. Convenience Canon The mode and time of the tax should be determined by the taxpayers' convenience. Taxpayers will be encouraged and motivated to pay their taxes as a result of this. The cost of collecting taxes should be less than the amount of tax collected, according to the Canon of Economy. Additional tax canons have been devised by modern economists. They are productivity, elasticity, flexibility, simplicity, and variety canons.
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