In: Accounting
Canons of taxation are the principal's that led to a good tax system. It was propounded by Adam Smith in his book called " The Wealth of Nation".
There are mainly four types of Canon of taxation propounded by him which are as follows :-
1 . Canon of equity = According to this principle every person should pay taxes as per his ability. For instance a rich person should pay higher taxes compare to a poor person. People should pay taxes in proportion to their income which they have enjoyed under the protection of state
2 . Canon of certainty = As per this principal amount of tax payable by a person should be certain and not a random amount or arbitrary.
Everyone should know what amount of tax is required to be paid, how to pay it and when to pay, this there should be a certainty.
3 . Canon of convenience= The mode of payment of tax should be very simple and not cumbersome. Moreover, timing of payment of tax should be convenient to the individual
4 . Canon of economy= As per this principle, there should be economy in the tax administration. Cost of collection of taxes should be far less than amounting of tax collected, then only collection of tax will be worthwhile.
Seven types of taxes that are imposed upon citizens of the United States are as follows :-
1 . Income tax = Any person earning income by any means satisfying certain conditions is required to pay income tax. Due date of filing of return is April 15. There are various deductions and tax credit available under tax legislation which can be claimed based upon certain conditions.
2 . Property taxes = these type of taxes are required to be paid by any person who owns any land, home etc.
3 . Consumptive taxes = These are those taxes which are paid on sales of any goods and items. They are generally paid at various stages on value addition done by any trader.
4. Corporate taxes = businesses are required to pay the taxes in the income derived by them from business activities.
5. Payroll taxes = these are the taxes that businesses are required to take out before any income is distributed to the employees for the services rendered by them to the businesses.
6 . Capital gain = Any profit derived on the sale of any investment is chargeable to the capital gain tax.
7. Inheritance or estate tax = These taxes are payable on inheritance of any estate.