Equity Tax and Adam Smith Essay - 2030 Words

Introduction This piece of eassy will contain two sections. In this part of the eassy I will discuss the meaning and importance of equity in taxation since Adam Smith included it as one of the Canons of taxation. Equity is defined as â€Å"redistributive taxation induces allocative distortions by driving a wedge between the price the consumer pays and the price the producer receives† (Begg et al. 2005, p.219). There are two types of equity to be considered: the horizontal equity, and vertical equity. â€Å"The horizontal equity requires that people in similar situations should be treated in the similar way†. (Kate. 2003, p-8). It seems to be a fair version of taxation to the people paying tax on their earnings. On the other hand, â€Å"Vertical†¦show more content†¦Adam Smiths discussion of taxation in the Wealth of Nations became, like the rest of his work, Ð ° classic setting the central focus for economic thought from that point on. And, like the rest of the work, it was Ð ° confused mixture of the banal and the fallacious. Thus, Smith set forth four canons of evident justice and utility in taxation, which were to become famous from then on. In my analysis of Adam Smiths chapter on taxation, I have come to the conclusion that Adam Smith believed that the taxation of the rental value of land was the best and fairest method of taxation. Introduction This section of the eassy will address the Consideration to what extent the current taxation system reflects the concept of equity. Before dealing with the theory of Consideration to what extent the current taxation system reflects the concept of equity, there are two areas which I will discuss, the first of these concerns the definition of taxation and the second covers the purpose of taxation. Taxation is an involuntary fee paid by either individuals or businesses to the government .While the purpose of taxation is the need to pay for national expenditure on, for example defence, government administration and interest on government borrowing and for local expenditure such as for local services, health, education, welfare and interest on loans. The UK Tax system Modern UK tax policy was developed since 18th century, it researched by the hugeShow MoreRelatedThe Canons Of Good Taxation Essay1464 Words   |  6 PagesCanons of good taxation refer to Adam Smith’s study illustrated in the book ‘Wealth of Nations’. The canons consist of equity, certainty, convenience and efficiency are used to determine the effectiveness of a tax system. This report will critically analyse these canons in relation to the recent bright-line test announced by the government. 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