Question

Describe the AICPA’s guideline for a fair system of taxation.

Answer 1

1. Equity and fairness : Equity here means horizontal as well as vertical equity, meaning that  similarly situated taxpayers be taxed similarly.  

2. Certainty : There should be certainity regarding the taxation rates, levy and applicability.

3. Convenience of payment: Convnience ensures compliance, thus tax payment should be due at a time or in a manner which is convnient to the tax payer.

4. Economy of collection: Cost to collect tax should not exceed the tax amount collected

5. Simplicity: Tax rules should be simple to read and understand by the common people for the better compliance

6. Neutrality: Neutrality stands for the proposition that taxpayers should not be unduly encouraged or discouraged from engaging in certain activities due to the tax law.

7. Economic growth and eficiency: Tax reforms should help in growth of overall economy. It should not be favoring one particular industry at the expense of other

8. Transparency and visibility: Transparency and visibility in a tax system enable taxpayers to know (1) the true cost of transactions and (2) when a tax is being assessed or paid and on whom

9. Minimum tax gap: Tax gap refers to the tax due and tax collected. For reducing the gap it is required to have procedural rules. rules imposed should not increase the cost of tax collection

1 0. Appropriate government revenue: Tax reform should have predictability so that government can determine the expected revenue from it so that compensatory taxes can be imposed to achieve the revenue targets.

Hope this helps, please give a like for the answer. Thanks !!