Principles of taxation The 18
th
-century philosopher Adam Smith attempted to
systematize the rules that should govern a rational system of
taxation. In his books he set down three general canons. I. The
subjects of every state ought to contribute towards the support
of the government in proportion to their respective abilities,
that is, in proportion to the revenue which they respectively
enjoy under the protection of the state.
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The tax which each individual is bound to pay ought to be
certain, and not arbitrary. The time of payment, the manner of
payment, the quantity to be paid, ought all to be clear and plain
to be contributor, and to every other person.Every tax ought to
be levied at the time, or in the manner, in which it is most likely
to be convenient for the contributor to pay it. Although they
need to be reinterpreted from time to time, these principles,
especially the first, retain remarkable relevance. From the first
can be derived both of the leading views of what is fair in the
distribution of tax burdens among taxpayers. These are the
belief that taxes should be based on the individual’s ability to
pay, known as the ability-to-pay principle, and the benefit
principle, the idea that there should be some equivalence
between what the individual pays and the benefits he derives
from governmental activities.
