9 Characteristics of a Good Tax System

9 Characteristics of a Good Tax System are listed and explained in this article and we hope you find it informative and helpful for your research.

Principles of a Good Tax System

Characteristics of a Good Tax System

Principles of a Good Tax System
Principles of a Good Tax System – Photo Source: https://studypoints.blogspot.com

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Not all taxes levied upon people are of good standard or quality, in most countries, the government put pressure on its citizens just so that they can achieve only selfish reasons, they do not put the effect of the pressure on the citizens into consideration.

They bring up huge taxes which are quote unaffordable abs make the citizens suffer unduly. To this end, it is important that we look at some principles of a good tax system.

9 Characteristics of a Good Tax System:

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1. Tax must be within the taxpayer’s ability to pay

Those levied to pay tax should only be levied according to how they can pay up without having to suffer undue pressure of hardship. Tax should not constitute a great percentage of the taxpayer’s income.

2. Cost of tax collection

It is quite out of place when the cost of tax collection becomes very high or equal to the tax collected. On a normal note, the cost of tax collection should not be equal to or even up to half of the amount collected.

3. Convenience

Tax payment should be something that is done without pressure but inconvenience in regards to the form, time, and place of payment. A good tax should only be paid when a person, product, or service is due to be taxed.

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4. Certainty

The process of tax collection, methods, and time of tax payment should be made clear to everyone who pays tax. It should not be done behind closed doors as it is a thing of the masses.

No one should be taken Unawares of, the amount to be paid should be communicated on time, and when there is an increment, it should also be communicated effectively so that no one will be in ignorance.

5. Revenue yield

From the standpoint of government, the total revenue that a tax generates is always of considerable importance. The government of countries is comfortable with taxes that provide a fairly predictable and steady income for the nation.

6. Taxation should be neutral

Something which is very important when considering taxation is the manner in which taxation affects the production, saving, and willingness of people to work.

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A good and reliable tax system should as much as possible not conflict unnecessarily with the demands and supply for goods and services.

7. Taxes should be paid based on Benefits received

As much as possible, a good tax system implies that those who benefit the most from the goods or services of a government should endeavor to pay more in regard to their area of dividends to further enable the government to provide more so that they can continue to enjoy their benefits without interruption.

It is undue to have a person pay tax upon goods or services made by the government when he or she does not benefit from such.

8. Flexibility

The tax system should never be rigid, rather it should be flexible enough to allow room for adjustments when peculiar needs arise.

Read Also: The Importance of Taxation in Nigeria

9. Simplicity

Tax systems should be as simple as possible to enable both the learned and unlearned to fully understand them. When it is difficult to understand, some taxpayers may feel cheated or unduly taxed no matter how good it may have been. It should be as easy as possible to avoid complications.

Taxation is to the advantage of the people, it is simply a way of giving back to the country where you belong so that the country can get better than it is and also meet some of its needs.

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