I.4.5 The principle of
Economy
The canon of Economy advocates that every tax should be
satisfied in two ways.
1. It should be economical for the state to collect it
.This implies that the cost of collecting a tax should be less than
the tax revenue to be collected. If it is more, then it is uneconomical to
collect such a tax and if the trends continue, that tax should not be levied as
best alternative.
2. It should be economical to the Taxpayer.
This means that after paying the tax, the taxpayer should remain in the
original state. That is to say, the taxpayer should remain with sufficient
money to sustain his new business opportunities. Therefore, a heavy tax on
incomes discourages savings and investments and hence encourages tax evasion,
smuggling and other related offences in order to maximise returns.
Taxes should not necessarily hinder the attainment of economic
objectives, including full employment, growth, and stability. Indeed taxes may
be used to advance them.
I.4.6 The principle of
Elasticity
This principle implies that, Government should raise the tax
rates when in need of more revenues and illustrates that taxes should be
elastic. Excise duty is one of the best taxes with high degree of
responsiveness to a good number of commodities and their rates can periodically
be increased to raise more revenue. However, if the rates are exaggerated would
cause more problems as this would invite or encourage inflationary pressures in
the economy.
I.4.7 The principle of
Diversity
This principle advocates that there should be diversity in
taxation processes. That is to say, a narrow tax base would not meet the
revenue requirements of the country and this even compromise the principle of
equity. There should be variety of taxes from different sources. So as very
every state nationals contribute to revenue collections according to his
ability to pay. However, a large multiplicity of taxes will be difficult to
administer and therefore not cost effective
I.4.8 The principle of
productivity
This principle states that a tax should be productive to
mobilise enough revenues to adequately supplement government foreign sources of
funds to finance its social and development projects to benefit all citizens
and residents.
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