Essay Flashcards
Adam smith 4 canons
Equality
Efficiency
Convenience
Certainty
Smith quote- favouring certainty
Uncertainty is worse than inequality
Favours being aware and able to predict tax bill than public expectations of an equal systems impacting socioeconomic groups
Convenience
Ease to pay- less scope for avoidance or evasion
Equality
fair in impact
E.g low incomes, pensioners not unfairly treated
System needs to be viewed as equal by public
Why uk employment tax is easy - convenience example
Paye- automatic adjusted
Link 2020 project online system for paying and monitoring
Convenience critique in tax system
Complicated for self employed- complex tax system- submit regular tax returns and need the help of accountants
Efficiency
Cost to gov to administer, compliance costs for businesses to meet responsibilities
Contrast ACCA principles- simplicity, transparency, burden
Important not to be complicated to reduce evasion avoidance
But smith doesn’t mention burden- impacting certain groups lsss
Fiscal pressures
Environment- pressure groups w.g against fuel increase
Social- tax relief for low earners
Economic- more tax at low rates and avoid too many reliefs
Ethical- who pays?
Fairness
Brown- based on clear principles, to encourage work, savings investment
Why horizontal equity is ambiguous
What taxable capacity is- income or total wealth- capital gains etc
Different outgoings- e.g larger family to support
If uk had horizontal equity= high admin costs- less convenient (smith)
Convenience example
Vat- simple- added to goods and services without feeling like a tax
Progressive details
32,000 basic- rises to 40%….
Annual exemption- 11,000
Higher taxes- manipulation
Greater scope evasion and avoidance
Link flat tax may be beneficial- lower rate- slovakia 19%
Progressive concept
Ability to pay- acca 2008- relationship between wealth and tax- but ambiguous- assumes that the marginal utility of income falls as income rises- equality of sacrifice- how much more tax?
