Public Finance in India — Economics STD 12 Commerce / Arts — Question

Principles of taxation are also called canons of taxation. There are four principles (canons) of taxation, propounded by Adam Smith
(1) Canon of Equity or Equality
(2) Canon of Certainty
(3) Canon of Convenience
(4) Canon of Economy

They are explained as follows :

1. Canon of Equity or Equality : According to Adam Smith, every person should pay taxes to the government in proportion to his ability to pay.
Canon of equity or equality means rich people should pay more tax as compared to poor.

2. Canon of Certainty : Adam Smith suggested that the tax payer should know in advance that, how much tax he has to pay, at what time and in what form he has to pay tax to the government.

3. Canon of Convenience : According to this principle, every tax should be levied in such a manner and at such a time that, it becomes convenient to the tax payer to make payment.

4. Canon of Economy : This principle suggests that the cost of tax collection should be the minimum. If tax is collected economically, then such a tax is considered to be a good tax.
Every citizen of a country has to pay tax, imposed upon him as it is compulsory contribution to the government.
Tax is a major source of revenue to the government.
Therefore, public authority (Government) must consider all the principles (canons) of taxation in the preparation and implementation of tax system.