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CA Foundation · Business Economics · Public Finance

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

The canon of certainty requires that the amount, time and manner of payment of a tax be clearly known to the taxpayer and not arbitrary. Convenience concerns timing for the taxpayer, and economy concerns low collection cost, so those are different canons.

  1. AThe tax should be collected at a time and in a manner convenient to the taxpayer
  2. BThe tax a person must pay should be definite, not arbitrary, in amount, time and manner of paymentCorrect
  3. CThe cost of collecting the tax should be very small relative to the revenue raised
  4. DThe tax revenue should be adjustable with changes in national income

Explanation

Certainty means the taxpayer should know clearly how much to pay, when and how. Option A describes the canon of convenience, option C describes economy, and option D relates to elasticity or flexibility, not certainty.

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