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Canons of Taxation or Principles of a good taxation System


According to ADAM SMITH, a good taxation system is that one which contains the four following canons or principles.

XI Economics Canons of Taxation or Principles of  a good taxation System
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Explain Robbin's definition of economics is the science of scarcity and choice.

Public Finance & Elements Of Public Finance

Difference Between Public Finance and Private Finance


The canon of Equity equality or equally suggests that the burden of taxes must be distributed equally or equitably regarding to the ability of the taxpayers. Adam smith suggests that taxes should be paid according to the ability to pay. In other worlds, rich people should paid taxes with higher rate and the poor should paid taxes with lower rate. The canon of equality or equity implies that a tax system should contain “progressive tax rate.”


The canon of certainty implies that the tax system must have an element of certainty. The taxpayers should be well informan about
  1. The time of payment,
  2. The amount to be paid and
  3. The methods of payment of the tax

The tax payers should not feel any harassment while paying tax. Uncertainty breads corruption and encourages tax evasion.


The canon of economy suggests that there should not be made unnecessary expenditure while collecting and administrating taxes. If government spends too much money on collecting taxes the revenues will be decreased and it will add nothing to the national income. Tax collection costs must be lowered as far as possible.


The canon of simplicity suggests that tax rates as well as tax system itself must be very simple and not be complex one


It means the tax system should consist of all types of taxes so that everyone may contribute towards the government revenue.


It suggests that tax system should be so flexible that the required amount of revenue can be increased or decreased or decreased

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