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Among Adam Smith’s contributions to economic thought, was his Canons of Taxation - Leaving Cert Economics - Question 5 - 2006
Question 5
Among Adam Smith’s contributions to economic thought, was his Canons of Taxation. (i) State and explain Adam Smith’s FOUR Canons of Taxation. (ii) Do you consider ... show full transcript
Worked Solution & Example Answer:Among Adam Smith’s contributions to economic thought, was his Canons of Taxation - Leaving Cert Economics - Question 5 - 2006
Step 1
State and explain Adam Smith’s FOUR Canons of Taxation.
Answer
Adam Smith articulated four essential Canons of Taxation, which include:
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Equity: Taxation should be proportionate to the income of the taxpayer. Individuals with higher incomes should contribute more, reflecting their ability to pay. This principle aims to promote fairness in the taxation system.
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Economy: The cost of tax collection should be minimal. Resources used to collect taxes should not outweigh the revenue generated. An efficient tax system minimizes operational expenses, ensuring more funds are allocated effectively.
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Certainty: Taxpayers should have clear guidelines on the amount they owe and the methods of collection. Certainty aids compliance, as individuals are less likely to evade taxes if they understand their obligations clearly.
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Convenience: Tax payments should be made at a time and in a manner convenient to the taxpayer. The timing and method of tax collection should not create undue hardship, which can enhance compliance and reduce frustration.
Step 2
Do you consider that these Canons are useful for analysing the taxation system in Ireland today? Justify your answer.
Answer
Yes, Adam Smith’s Canons of Taxation provide a relevant framework for evaluating the Irish taxation system. Each Canon can be reflected in contemporary practices:
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Equity: The progressive nature of Irish income taxation aligns with the principle of equity, where higher earners contribute a larger share of their income.
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Economy: The efficiency of Revenue Ireland in collecting taxes demonstrates adherence to the economy principle, as efforts are made to minimize the cost of collection.
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Certainty: The predictability in tax codes and clear regulations enhances taxpayer understanding, promoting certainty.
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Convenience: The introduction of online tax payments and other modern methods demonstrates a focus on convenience, making it easier for taxpayers to meet their obligations.
In conclusion, while the Canons are foundational, ongoing evaluation and adaptation are necessary to address evolving economic contexts and taxpayer needs.