A fair, effective, and efficient tax system that promotes sustainable public finances is guaranteed by the principles of sound tax policy for public finance management. Here is a brief synopsis of the fundamental ideas:
1. Fairness or equity
Horizontal equity: Taxpayers should pay comparable taxes if their financial circumstances are comparable.
Vertical equity: Higher-income taxpayers ought to make larger contributions (progressive taxes).
2. Effectiveness
Taxes ought to reduce the distortion of economic behavior, such as saving, investing, or working.
Revenue is increased by an effective tax system without lowering productivity or economic growth.
3. Ease
It should be simple to comprehend and adhere to the tax system.
Complicated tax regulations might result in avoidance or evasion and raise administrative expenses.
4. Openness
It should be obvious to taxpayers how much they are paying and why.
The government ought to answer for the use of tax money.
5. Sufficient Revenue
Enough money should be raised by the tax system to pay for public duties and services.
For long-term planning to be supported, it needs to remain steady and predictable across time.
6. Adaptability
The tax code need to be flexible enough to accommodate shifting demands and economic circumstances.
Governments ought to be able to react to emergencies or changing policy objectives thanks to it.
7. Viability of Administration
Both the government and taxpayers should be able to afford the cost of tax collection.
The architecture of tax systems should facilitate compliance and enforcement.
Mohamed Yasin
