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IAI Actuarial Core Principles · Business Finance · Personal and corporate taxation

Adam Smith's canon of 'certainty' in taxation requires that:

Certainty means the tax a person must pay, the date and the method of payment should be clear and plain to the taxpayer and not arbitrary. It differs from convenience, economy and equity, which concern timing, collection cost and fairness respectively.

  1. ATax should be collected at the time and in the manner most convenient to the taxpayer
  2. BThe amount, time and manner of payment should be clear and known to the taxpayerCorrect
  3. CTax should cost as little as possible to collect
  4. DTaxpayers should contribute in proportion to their ability to pay
  5. Tax rates should never change over time

Explanation

Certainty means the taxpayer should know what is payable, when and how. Convenience concerns timing, economy concerns collection cost, and equity concerns ability to pay. It does not forbid rate changes.

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